AEV SEC Form 17-A

1 • SEC FORM 17-A (ANNUAL REPORT)

April 14, 2015

SECURITIES AND EXCHANGE COMMISSION SEC Building, EDSA Greenhills Mandaluyong City, Metro Manila ATTENTION : DIR. VICENTE GRACIANO P. FELIZMENIO, JR. Director, Markets and Securities Regulation Department PHILIPPINE STOCK EXCHANGE, INC. 3rd Floor, Philippine Stock Exchange Plaza Ayala Triangle, Ayala Avenue, Makati City ATTENTION : MS. JANET ENCARNACION Head, Disclosure Department PHILIPPINE DEALING & EXCHANGE CORP. Market Regulatory Services Group 37/F, Tower 1, The Enterprise Center 6766 Ayala Avenue corner Paseo de Roxas, Makati City ATTENTION : MS. VINA VANESSA S. SALONGA Head - Issuer Compliance and Disclosures Department RE : SEC Form 17 – A (Annual Report 2014) Gentlemen: We submit two (2) copies of SEC Form 17-A (Annual Report 2014) of Aboitiz Equity Ventures, Inc. for your files. Kindly acknowledge receipt hereof. Thank you. Very truly yours, ABOITIZ EQUITY VENTURES, INC. By

M. JASMINE S. OPORTO Corporate Secretary

TABLE OF CONTENTS PART I BUSINESS AND GENERAL INFORMATION

Item 1 Business 5 Item 2 Properties 104 Item 3 Legal Proceedings 106 Item 4 Submission of Matters to a Vote of Security Holders 108

PART II OPERATIONAL AND FINANCIAL INFORMATION

Item 5 Market for Issuer’s Common Equity and Related Stockholder Matters 108 Item 6 Management’s Discussion and Analysis or Plan of Operations 109 Item 7 Financial Statements and Supplementary Schedules 141 Item 8 Changes in and Disagreements with Accountants on Accounting and

Financial Disclosures 141

PART III CONTROL AND COMPENSATION INFORMATION

Item 9 Directors and Executive Officers of the Issuer 142 Item 10 Executive Compensation 152 Item 11 Security Ownership of Certain Beneficial Owners and Management 154 Item 12 Certain Relationships and Related Transactions 156

PART IV CORPORATE GOVERNANCE

Item 13 Corporate Governance 157 PART V EXHIBITS AND SCHEDULES

Item 14 Exhibits 158 Reports on SEC Form 17-C (Current Report) SIGNATURES INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES


COVER SHEET

C E O 2 5 3 6 S.E.C. Registration Number

A B O I T I Z E Q U I T Y V E N T U R E S , I N C .

( Company's Full Name )

3 2 N D S T R E E T , B O N I F A C I O G L O B A L

C I T Y , T A G U I G C I T Y , M E T R O M A N I L A

P H I L I P P I N E S (Business Address: No. Street City / Town / Province )

M. JASMINE S. OPORTO 02- 886-2800

Contact Person Company Telephone Number 2014

Annual Report 3rd Monday of 1 2 3 1 1 7 - A 0 5 1 8 Month Day FORM TYPE Month Day

Fiscal Year Annual Meeting

N/A Secondary License Type, if Applicable

SEC N/A

Dept. Requiring this Doc Amended Articles Number/Section

x Total No. of Stockholders Domestic Foreign - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

To be accomplished by SEC Personnel concerned

File Number LCU

Document I.D. Cashier

S T A M P S

Remarks = Pls. use black ink for scanning purposes


(b) has been subject to such filing requirements for the past 90 days.

Yes ( ) No ( )

13. State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within sixty (60) days prior to the date of filing. If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided the assumptions are set forth in this Form.

For 2014, aggregate voting stock of registrant held outside of its affiliates and/or officers and employees totaled 2,418,763,944 shares (for details please refer to the attached notes to financial statements and Schedule H of this report) while its average market price per share was P52.70.

Based on this data, total market value of registrant’s voting stock not held by its affiliates and/or officers and employees was computed to be P127,468,859,848.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN INSOLVENCY/SUSPENSION OF PAYMENTS PROCEEDINGS

DURING THE PRECEDING FIVE YEARS: 14. Check whether the registrant has filed all documents and reports required to be filed by Section 17 of

the RSA subsequent to the distribution of securities under a plan confirmed by a court or the SEC. Yes ( ) No ( )

DOCUMENTS INCORPORATED BY REFERENCE

15. If any of the following documents are incorporated by reference, briefly describe them and identify

the part of SEC Form 17-A into which the document is incorporated:

(a) Any annual report to security holders;

(b) Any information statement filed pursuant to SRC Rule 20;

(c) Any prospectus filed pursuant to SRC Rule 8.1.


PART 1 – BUSINESS AND GENERAL INFORMATION Item 1. Business

(1) Business Development

The Registrant, Aboitiz Equity Ventures, Inc., is the public holding and management company of the Aboitiz Group, one of the largest conglomerates in the Philippines. Incorporated on September 11, 1989, the Company was originally known as Cebu Pan Asian Holdings, Inc. Its name was changed to Aboitiz Equity Ventures, Inc. on December 29, 1993, and its ownership was opened to the general public through an Initial Public Offering (IPO) of its stocks in 1994. Since then, the Company has expanded its portfolio into a wide range of businesses. AEV’s core businesses, conducted through its various subsidiaries and associates, can be grouped into five main categories: power distribution, generation, and retail electricity supply; financial services; food manufacturing; real estate; and portfolio investments (parent company/others). AEV’s power business unit, Aboitiz Power Corporation (AboitizPower), was incorporated in 1998. AboitizPower is a publicly-listed holding company that, through its Subsidiaries and Affiliates, is a leader in the Philippine power industry and has interests in a number of privately-owned generation companies and distribution utilities. Ownership in AboitizPower was opened to the public through an IPO of its common shares in July 2007 in the Philippine Stock Exchange, Inc. (PSE). AEV’s financial services group is composed of Union Bank of the Philippines (UnionBank) and its Subsidiaries. UnionBank is a publicly-listed universal bank. It was incorporated on August 16, 1968 and was originally known as Union Savings and Mortgage Bank. The bank’s common shares were listed in the PSE on June 29, 1992. It was granted the license to operate as a universal bank on July 15, 1992. UnionBank became the thirteenth and youngest universal bank in the country after operating as a commercial bank for only ten years. In January 2013, the Company and its Subsidiary, Pilmico Foods Corporation (Pilmico) accepted the offer of UnionBank to purchase all of their outstanding shares in City Savings Bank, Inc. (CitySavings), a Cebu-based thrift bank. Meanwhile, AEV’s food business unit, Pilmico, is one of the country’s largest manufacturers of flour, and ranks among the top three domestic flour producers in terms of sales. To diversify the cyclical nature of its existing products, Pilmico entered the swine production and animal feeds businesses in 1997. Aboitiz Land, Inc. (AboitizLand), the real estate arm of the Aboitiz Group, was incorporated on January 1, 1964 under the name Central Visayan Warehousing Co., Inc. AboitizLand remains one of the country’s most trusted names in real estate development, with investments in residential, commercial and industrial developments, and property management in Cebu after two decades in operation. The Company completed the acquisition of 100% ownership of AboitizLand from Aboitiz & Company, Inc. (ACO), at an acquisition cost of P3.2 bn on November 19, 2012. ACO is the majority stockholder of AEV. To meet the demands of the Company’s growing business, AEV transferred its corporate headquarters from Cebu to Metro Manila in 2013. The transfer, including the corresponding amendment to the Company’s corporate documents, was approved by the stockholders during the May 20, 2013 Annual Stockholders’ Meeting. AEV’s current principal office address is at 32nd

Street, Bonifacio Global City, Taguig City, Metro Manila. AEV and its Subsidiaries maintain administrative and liaison offices in Cebu. On November 8, 2013, SEC approved AEV’s application for the issuance of fixed-rate corporate retail bonds (the “Bonds”) with an aggregate principal amount of up to P10 bn. The Bonds,


which received the highest possible rating of “PRS Aaa” rating from the Philippine Rating Services Corporation, were issued simultaneously in two series, the seven-year bonds with a fixed-interest rate of 4.4125% per annum, and the ten-year bonds with a fixed-interest rate of 4.6188% per annum. The Bonds are also listed with the Philippine Dealing and Exchange Corporation (PDEx), the fixed-income securities market which provides an electronic trading platform of exchange for fixed-income securities. As part of its efforts to streamline its operations and focus on its core businesses of power generation, power distribution, banking, food, and land development, AEV completed the divestment of its interests in the shipping and shipping-related businesses and disposed of all its investments in Aboitiz Jebsen Company, Inc., Aboitiz Jebsen Manpower Solutions, Inc., and Jebsen Maritime, Inc. (collectively the “Abojeb Group”) to PTC Holdings Corporation, Behike Holdings, Inc., Valdicava Holdings, Inc., Jebsen Invest A.S. and Furunes Holdings, Inc. The total purchase price of AEV’s interests in the Abojeb Group is equivalent to US$8.3 mn. On August 28, 2014, the Board of Directors approved the sale of up to 50 million of AEV’s common shares held in treasury. The shares were sold in tranches at prevailing market prices through the facilities of the PSE. The Board of Directors delegated to management the authority to determine the timing of the sale of treasury shares. Currently, the Company already disposed of a total of 21,794,986 treasury shares, thereby increasing the Company’s issued and outstanding shares from 5,521,871,821 to 5,543,666,807 as of March 31, 2015. The Company is continually in the look out for possible business opportunities that will augment and complement the Company’s core businesses. On June 2012, AEV signed the Memorandum of Agreement with Gazasia Ltd. (Gazasia) in an effort to provide sustainable and green transport solutions through the utilization of non-hazardous organic waste. AEV and Gazasia’s partnership intends to jointly develop, construct and operate biomethane facilities that will convert organic waste material into carbon-neutral, sustainable and renewable fuel for vehicles in the form of liquid biomethane. Construction of the biogas plant began in 2014. On May 2013, the Company entered into a joint venture with J.V. Angeles Construction Company (JVACC) for the supply of treated bulk water to the Davao City Water District (DCWD). The proposed venture includes the construction of both a hydro electric-powered bulk water treatment facility and the conveyance system needed to deliver treated bulk water to numerous DCWD delivery points. On January 2014, AboitizLand and Ayala Land Inc. entered into a joint venture agreement (JVA) for the development of a 15-hectare property located in Subangdaku, Mandaue City, Cebu. The signing of said JVA led to the incorporation of Cebu District Property Enterprise Inc. (CDPEI). In 2015, CDPEI started the development of the 15-hectare property into a city center. The proposed city center has residential and commercial spaces with retail and office components, with direct access to major roads and public transport facilities. The Company completed its first international acquisition by expanding into the Vietnam market. On May 29, 2014, Pilmico International Pte. Ltd. (Pilmico International), a Singapore-based affiliate of AEV, acquired 70% of the total outstanding shares in Vin Hoan 1 Feed JSC (VHF). VHF is one of the largest aqua feed producers in Vietnam. After completion of the acquisition, VHF was thereafter renamed as Pilmico VHF Joint Stock Company. Pilmico International has the obligation to purchase the remaining 30% of the outstanding shares of Pilmico VHF within a period of five years. The Company also participated in public-private partnership programs (PPPs) of the Government. The Company, together with its partner, AC Infrastructure Holdings Corporation (collectively known as “Team Orion”), submitted the highest complying bid of P11.659 billion (bn) for the Cavite-Laguna Expressway Project. Optimal Infrastructure Development (Optimal),


a disqualified bidder on the grounds that its bid security fell short of the 180 days required by the Government, appealed the decision to disqualify it with the Office of the President. The appeal has since been given due course and the project was rebidded with a minimum floor price of P20.1 bn. The Company is also participating in the bidding for the operation and maintenance of the existing LRT Line 2 (LRT 2) system and the Masinag Extension system last February 2015. For this project, the Company partnered with SMRT International Pte. Ltd., a wholly-owned subsidiary of SMRT Corporation Ltd., a Singapore-based multi-modal transport service provider offering rail, bus and taxi services. The Company, through Team Trident consortium, also filed prequalification documents for the bidding to finance, design, construct, operate and maintain the Laguna Lake Expressway-Dike Project. Team Trident is a consortium among AEV, Ayala Land, Inc. (ALI), Megaworld Corporation (MEG), SM Prime Holdings, Inc. (SMPH) and the lead member, Trident Infrastructure and Development Corporation (TIDC). TIDC is a joint venture company among AEV, ALI, MEG and SMPH incorporated for purposes of pre-qualifying for the bidding and evaluating the feasibility of the Project. Neither AEV nor any of its Subsidiaries has ever been the subject of any bankruptcy, receivership or similar proceedings. Neither AEV nor any of its Subsidiaries has been the subject of any material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business.

(2) Business of Issuer

As of December 31, 2014, AEV’s core businesses, conducted through its various Subsidiaries and Affiliates, can be grouped into five main categories as follows: (a) power distribution, power generation and retail electricity supply, (b) financial services, (c) food manufacturing, (d) real estate, and (e) portfolio investments (parent company/others).

Based on the SEC paremeters of what constitutes a significant Subsidiary under Item XX of Annex “B” of SRC Rule 12, the following are presently AEV’s significant Subsidiaries: Aboitiz Power Corporation and Subsidiaries, Pilmico Foods Corporation and Subsidiaries, and Aboitiz Land, Inc. and Subsidiaries. (Please see Annex “A” for the corporate structure of AEV showing the different business segments.)

(a) Description of Registrant

(i) Principal Products

POWER GENERATION AND DISTRIBUTION

Aboitiz Power Corporation (AboitizPower)

AboitizPower is a publicly-listed holding company that, through its Subsidiaries and Affiliates, is a leader in the Philippine power industry and has interests in a number of privately-owned generation companies and distribution utilities. AEV owns 76.88% of the outstanding capital stock of AboitizPower as of March 31, 2015. The Aboitiz Group’s involvement in the power industry began when members of the Aboitiz family acquired 20% ownership interest in VECO in the early 1900s. The Aboitiz Group’s direct and active involvement in the power distribution industry can be traced to the 1930s when ACO acquired Ormoc Electric Light Company and its accompanying


ice plant Jolo Power Company, and Cotabato Light. In July 1946, the Aboitiz Group strengthened its position in power distribution in Southern Philippines when it acquired Davao Light & Power Company, Inc. (Davao Light), which is now the third largest privately-owned electric utility in the Philippines in terms of customers and annual GWh sales. In December 1978, ACO divested its ownership interests in Ormoc Electric Light Company and Jolo Power Company to allow these companies to be converted into electric cooperatives, which was the policy being promoted by the government of then-President Ferdinand Marcos. ACO sold these two companies and scaled down its participation in the power distribution business in order to focus on the more lucrative franchises held by Cotabato Light & Power Company (Cotabato Light), Davao Light and Visayan Electric Company, Inc. (VECO). In response to the Philippines’ pressing need for adequate power supply, the Aboitiz Group became involved in power generation, becoming a pioneer and industry leader in hydroelectric energy. In 1978, the Aboitiz Group incorporated Hydro Electric Development Corporation (HEDC). HEDC carried out feasibility studies (including hydrological and geological studies), hydroelectric power installation and maintenance, and also developed hydroelectric projects in and around Davao City. On June 26, 1990, the Aboitiz Group also incorporated Northern Mini-Hydro Corporation (now Cleanergy, Inc.) which focused on the development of mini-hydroelectric projects in Benguet province in northern Luzon. By 1990, HEDC and Cleanergy had commissioned and were operating 14 plants with a combined installed capacity of 36 MW. In 1996, the Aboitiz Group led the consortium that entered into a BOT agreement with National Power Corporation (NPC) to develop and operate the 70-MW Bakun AC hydroelectric plant in Ilocos Sur. AboitizPower was incorporated on February 13, 1998 as a holding company for the Aboitiz Group’s investments in power generation and distribution. However, in order to prepare for growth in the power generation industry, AboitizPower was repositioned in the third quarter of 2003 as a holding company that owned power generation assets only. The divestment by AboitizPower of its power distribution assets was achieved through a property dividend declaration in the form of AboitizPower’s ownership interests in the different power distribution companies. The property dividend declaration effectively transferred direct control over the Aboitiz Group’s power distribution business to AEV. Further, in 2005, AboitizPower consolidated its investments in mini-hydroelectric plants in a single company by transferring all of HEDC’s and Cleanergy’s mini-hydroelectric assets into Hedcor, Inc. (Hedcor). In December 2006, AboitizPower and its partner, Statkraft Norfund Power Invest AS (SN Power) of Norway, through SN Aboitiz Power–Magat, Inc. (SN Aboitiz Power–Magat) submitted the highest bid for the 360-MW Magat hydroelectric plant auctioned by Power Sector Assets and Liabilities Management Corporation (PSALM). The price offered was US$530 million (mn). PSALM turned over possession and control of the Magat Plant to SN Aboitiz Power-Magat on April 26, 2007. In a share swap agreement with AEV on January 20, 2007, AboitizPower issued a total of 2,889,320,292 of its common shares in exchange for AEV’s ownership interests in the following distribution companies, as follows:

• An effective 55% ownership interest in VECO, which is the second largest

privately-owned distribution utility in the Philippines in terms of customers and annual GWh sales and is the largest distribution utility in the Visayas region;


• 100% equity interest in each of Davao Light and in Cotabato Light. Davao Light is the third largest privately-owned distribution utility in the Philippines in terms of customers and annual GWh sales;

• An effective 64% ownership interest in Subic EnerZone Corporation (SEZ), which manages the Power Distribution System (PDS) of the Subic Bay Metropolitan Authority; and

• An effective 44% ownership interest in San Fernando Electric Light and Power Co., Inc. (SFELAPCO), which holds the franchise to distribute electricity in the city of San Fernando, Pampanga, in Central Luzon and its surrounding areas.

In February 2007, AboitizPower, through its wholly-owned Subsidiary, Therma Power, Inc. (TPI), entered into a Memorandum of Agreement (MOA) with Taiwan Cogeneration International Corporation (TCIC) to collaborate in the building and operation of an independent coal-fired power plant in the Subic Bay Freeport Zone, called the Subic Coal Project. In May 2007, Redondo Peninsula Energy, Inc. (RP Energy) was incorporated as the project company that will undertake the Subic Coal Project. In 2011, Meralco PowerGen Corporation (MPGC), TCIC and TPI entered into a Shareholders’ Agreement to formalize their participation in RP Energy. MPGC took the controlling interest in RP Energy, while TCIC and TPI maintained the remaining stake equally. On April 20, 2007, AboitizPower acquired 50% of the outstanding capital stock of East Asia Utilities Corporation (EAUC) from El Paso Philippines Energy Company, Inc. (El Paso Philippines). EAUC operates a Bunker C-fired plant with a capacity of 50- MW within MEPZ I in Mactan Island, Cebu. On the same date, AboitizPower also acquired from EAUC 60% of the outstanding common shares of Cebu Private Power Corporation (CPPC). CPPC operates a 70-MW Bunker C-fired plant in Cebu City. On June 8, 2007, as part of the reorganization of the power-related assets of the Aboitiz Group, AboitizPower agreed to acquire from its Affiliate, AboitizLand, a 100% interest in Mactan Enerzone Corporation (MEZ), which owns and operates the PDS in MEPZ II in Mactan Island, Cebu, and a 60% interest in Balamban Enerzone Corporation (BEZ), which owns and operates the PDS in WCIP-SEZ in Balamban, in the western part of Cebu. AboitizPower also consolidated its ownership interests in SEZ by acquiring the combined 25% interest in SEZ held by AEV, SFELAPCO, Okeelanta Corporation (Okeelanta) and Pampanga Sugar Development Corporation (PASUDECO). These acquisitions were made through a share swap agreement which involved the issuance of AboitizPower’s 170,940,307 common shares issued at the IPO price of P5.80 per share in exchange for the foregoing equity interests in MEZ, BEZ and SEZ. Ownership in AboitizPower was opened to the public through an IPO of its common shares in July 2007. Its common shares were officially listed in the Philippine Stock Exchange, Inc. (PSE) on July 16, 2007. In August 2007, the Company, together with Vivant Energy Corporation (VEC) of the Garcia group, signed a MOA with Global Business Power Corporation (Global Power) of the Metrobank group for the construction and operation of a 3 x 82-MW coal-fired power plant in Toledo City, Cebu (Cebu Coal Project). The Company and the Garcia group formed Abovant Holdings, Inc. (Abovant) as the investment vehicle of their 44% equity interest in Cebu Energy Development Corporation (Cebu Energy), the project company of the Cebu Coal Project. AboitizPower owns 60% equity interest in Abovant and effectively holds a 26.40% beneficial interest in Cebu Energy. On November 15, 2007, AboitizPower closed the purchase of the 34% equity ownership in STEAG State Power Inc. (STEAG Power), owner and operator of a 232-MW coal-fired power plant located in PHIVIDEC Industrial Estate in Misamis Oriental, Northern Mindanao. AboitizPower won the competitive bid to buy the 34% equity from Evonik


Steag GmbH (formerly known as Steag GmbH) in August 2007. The total purchase price for the 34% equity in STEAG is US$102 mn, inclusive of interests. On November 28, 2007, SN Aboitiz Power – Benguet, Inc. (SN Aboitiz Power – Benguet), the then consortium between AboitizPower and SN Power, submitted the highest bid for the Ambuklao-Binga hydroelectric power complex consisting of the 75-MW Ambuklao hydroelectric power plant located in Bokod, Benguet and the 100-MW Binga hydroelectric power plant located in Itogon, Benguet. The price offered was US$325 mn. In 2007, AboitizPower entered into an agreement to buy the 20% equity of Team Philippines in SEZ for P92 mn. Together with the 35% equity in SEZ of AboitizPower’s Subsidiary Davao Light, this acquisition brought AboitizPower’s total equity in SEZ to 100%. In 2008, AboitizPower bought the 40% equity ownership of Tsuneishi Holdings (Cebu), Inc. (THC) in BEZ for approximately P178 mn. The acquisition brought AboitizPower’s total equity in BEZ to 100%. On May 26, 2009, AP Renewables, Inc. (APRI), a wholly-owned Subsidiary of AboitizPower, took over the ownership and operations of the 289-MW Tiwi geothermal power facility in Albay and the 458-MW Makiling-Banahaw geothermal power facility in Laguna (collectively referred to as the “Tiwi-MakBan geothermal facilities”) after winning the competitive bid conducted by PSALM on July 30, 2008. The Tiwi-MakBan geothermal facilities have a sustainable capacity of approximately 462 MW. Therma Luzon, Inc. (TLI), a subsidiary of AboitizPower, won the competitive bid for the appointment of the Independent Power Producer Administrator (IPPA) of the 700-MW contracted capacity of the Pagbilao Coal Fired Power Plant on August 28, 2009. It assumed dispatch control of the Pagbilao power plant on October 1, 2009, becoming the first IPPA in the country. As IPPA, TLI is responsible for procuring the fuel requirements of, and for selling the electricity generated by, the Pagbilao power plant. The Pagbilao power plant is located in Pagbilao, Quezon. AboitizPower, through its subsidiary, Therma Marine, Inc. (TMI), assumed ownership over Mobile 1 and Mobile 2 on February 6, 2010 and March 1, 2010, respectively. The two power barges were acquired from PSALM for US$30 mn through a negotiated bid concluded on July 31, 2009. Each of the barge-mounted diesel-powered generation plants has a generating capacity of 100 MW. Mobile 1 and Mobile 2 are moored at Barangay San Roque, Maco, Compostela Valley and Nasipit, Agusan del Norte, respectively. Prior to AboitizPower’s acquisition of the barges, Mobile 1 was referred to as Power Barge (PB) 118 while Mobile 2 was referred to as PB 117. On May 27, 2011, Therma Mobile, Inc. (TMO), a subsidiary of AboitizPower, acquired four barge-mounted floating power plants located at Navotas Fishport, Manila, including their respective operating facilities, from Duracom Mobile Power Corporation and East Asia Diesel Power Corporation. The barge-mounted floating power plants have a total installed capacity of 242 MW. The barges have undergone rehabilitation starting July 2011, and commercial operations began on November 12, 2013. To meet the demands of AboitizPower’s growing business, it transferred its corporate headquarters from Cebu to Metro Manila. The transfer to its present principal office address was approved by the stockholders during the May 20, 2013 Annual Stockholders’ Meeting and was approved by the SEC on July 16, 2013. AboitizPower’s current principal office address is at 32nd Street, Bonifacio Global City, Taguig City, Metro Manila.


In 2013, Aboitiz Energy Solutions, Inc. (AESI) won 40 strips of energy corresponding to 40 MW capacity of ULGPP. The notice of award was issued to AESI on January 29, 2014 and this allowed AESI to sell 40 MW of geothermal power from ULGPP beginning January 1, 2015. Therma Power-Visayas, Inc. (TPVI), a subsidiary of AboitizPower, submitted the highest bid for the privatization of the Naga Power Plant located in Colon, Naga City in the Province of Cebu last March 31, 2014. Salcon Power Corporation, the current operator of the plant, exercised its right to top TPVI’s bid under the terms of its agreement with NPC and PSALM. On May 15, 2014, TPI entered into a joint venture agreement with TPEC Holdings Corporation (TPEC) to form Pagbilao Energy Corporation (PEC). PEC is the project company that will develop, construct and operate the 400 MW Pagbilao Unit III, which will be built in the same location as the existing 700-MW Pagbilao Units I and II coal-fired thermal power plant in Pagbilao Quezon. On June 19, 2014, AboitizPower acquired 100% ownership interest in Lima Utilities Corporation, now Lima Enerzone Corporation (Lima Enerzone) from Lima Land, Inc. (Lima Land), a wholly owned subsidiary of AboitizLand. Lima Enerzone is the electricity distribution utility serving the Lima Technology Center (LTC) located in Batangas. Lima Enerzone manages a 50 MVA substation with dual power supply system connected through a 69 KV transmission line of the NPC. The Lima Enerzone substation is directly connected to the grid in Batangas City with an alternate connection to the Mak-Ban Geothermal line. On August 28, 2014, AboitizPower disposed of 20% of its interest in Therma Visayas, Inc. (TVI) to Vivant Integrated Generation Corporation (VIGC) of the Garcia group. In November 2014, AboitizPower, through its holding company for its renewable assets, Aboitiz Renewables, Inc. (ARI), entered into a joint framework agreement with SunEdison, Inc. (SunEdison) to jointly explore, develop, construct and operate utility scale solar photovoltaic power generation projects in the Philippines for the next three years. The projects intend to swiftly bring cost-effective solar energy to the country. Neither AboitizPower nor any of its Subsidiaries has ever been the subject of any bankruptcy, receivership or similar proceedings. Neither AboitizPower nor any of its Subsidiaries has been the subject of any material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business. Aboitiz Renewables, Inc. (ARI) Since the start of its operations in 1998, AboitizPower has been committed to developing expertise in renewable energy technologies. AboitizPower’s management believes that due to growing concerns on the environmental impact of power generation using traditional fossil fuel energy sources, greater emphasis should be placed on providing adequate, reliable and reasonably priced energy through innovative and renewable energy technologies such as hydroelectric and geothermal technologies. As such, a significant component of AboitizPower’s future projects is expected to focus on those projects that management believes will allow AboitizPower to leverage its experience in renewable energy and help maintain AboitizPower’s position as a leader in the Philippine renewable energy industry. As one of the leading providers of renewable energy in the country, AboitizPower holds all its investments in renewable energy through its wholly-owned Subsidiary, ARI.


AboitizPower, either directly and/or through ARI, owns equity interests in the following generation companies, among others:

• 100% equity interest in APRI, which owns the 390-MW Tiwi-MakBan

geothermal facilities located in Tiwi, Albay, Bay and Calauan, Laguna and Sto. Tomas, Batangas;

• 50% effective interest in SN Aboitiz Power-Magat, which operates the 360-MW Magat HEPP in Isabela in northern Luzon;

• 50% effective interest in SN Aboitiz Power-Benguet, which operates the 231-MW Ambuklao-Binga HEPP complex in northern Luzon;

• 100% equity interest in LHC, which operates the 70-MW Bakun AC HEPP in Ilocos Sur in northern Luzon;

• 100% equity interest in Hedcor, which operates 16 mini-hydroelectric plants (each with less than 10 MW in installed capacity) with a total capacity of 42 MW located in Benguet province in northern Luzon and in Davao City in southeastern Mindanao;

• 100% equity interest in Hedcor Sibulan, which operates the 49-MW Sibulan and Tudaya 1 HEPP in Davao del Sur;

• 100% equity interest in Hedcor Tamugan, which proposes to build a 11.5-MW Tamugan HEPP along Tamugan River in Davao City;

• 100% equity interest in Hedcor Tudaya, which operates the 7-MW Tudaya 2 HEPP in Davao del Sur;

• 100% equity interest in Hedcor Sabangan, which is currently building the 14-MW Sabangan run-of-river HEPP in Sabangan, Mountain Province;

• 100% equity interest in Hedcor Bukidnon, which will build the 68-MW run-of-river HEPP in Manolo Fortich, Bukidnon; and

• 100% equity interest in AP Solar Tiwi, Inc. (AP Solar), the project company established for AboitizPower’s solar energy projects.

AP Renewables, Inc. (APRI) APRI, a wholly-owned Subsidiary of ARI, is effectively 100% owned by AboitizPower. It is one of the country’s leading renewable power companies. It acquired the Tiwi-MakBan geothermal facilities located at the municipality of Tiwi, Albay and the municipalities of Bay and Calauan, Laguna and Sto. Tomas, Batangas from PSALM in May 2009. The two complexes have a total potential capacity of 693.2 MW. As geothermal power plants, Tiwi and MakBan produce clean energy that is reasonable in cost, efficient in operation and environment-friendly. With the continuous advancement in technology, APRI is setting its vision to operate and maintain the Tiwi and MakBan geothermal complexes in accordance with the highest professional standards of world-class independent power producers operating in a merchant market. APRI has successfully completed the refurbishment activity of the 14 generation units at the Tiwi and MakBan geothermal facilities. In March 2013, APRI completed the testing of the Units 5 and 6 of the MakBan geothermal power plant for 72 hours, at full load, per requirements of the Asset Purchase Agreement (APA) between APRI and PSALM. The successful completion of the performance tests will trigger the return of the Miscellaneous Bond and the assignment of the Geothermal Resource Sales Contract (GRSC) to APRI. Significant improvements in reliability and steam usage efficiency have been realized following the completion of the refurbishment activities. On May 26, 2013, APRI’s steam supply contract with the Philippine Geothermal Production Company (PGPC) shifted to a GRSC. The change is due to an existing provision under the Government’s contract with Chevron Geothermal Philippines Holdings, Inc. (Chevron) when the Tiwi-Makban facilities were bidded out under the Government’s privatization program. Under the GRSC, the effective steam price


payable to PGPC will be at a premium to coal. The contracts of APRI mimic that of coal plants, including the proportion of fuel to total cost of power. The GRSC wil continue to be effective until 2021. On August 13, 2013, APRI and PGPC amended the GRSC to modify the GRSC steam price formula to allow the price of steam to be measured at 50% of the prevailing spot market price at the given hour when spot market prices fall below the computed GRSC rate. This agreement resulted in a lower fuel cost during off-peak hours, thus allowing the company to maximize sales even during this period. The Interim Agreement can be extended by mutual agreement. The parties continue to discuss the merit and feasibility of mutually beneficial steam off-take arrangements. Through the years, the geothermal facilities have operated at an improved effificency level through rehabilitation programs to counteract inevitable decline in steam supply and plant maintenance shutdowns. SN Aboitiz Power – Magat, Inc. (SN Aboitiz Power-Magat) SN Aboitiz Power-Magat is a Subsidiary of MORE, which is 83.3% owned by ARI and 16.7% owned by SN Power Invest Netherlands BV (SN Power Netherlands). Consequently, AboitizPower holds 50% interest in SN Aboitiz Power-Magat. SN Aboitiz Power-Magat is ARI's joint venture with SN Power, a leading Norweigan hydropower company with projects and operations in Asia, Africa and Latin America. On December 14, 2006, SN Aboitiz Power-Magat won the bid for the 360-MW Magat hydroelectric power plant (Magat Plant) conducted by PSALM. The Magat Plant, which is located at the border of Isabela and Ifugao in northern Luzon, was completed in 1983. As a hydroelectric facility that can be started up in a short period of time, the Magat Plant is ideally suited to act as a peaking plant with opportunities to capture the significant upside potential that can arise during periods of high demand. This hydroelectric asset has minimal marginal costs, granting it competitive advantage in terms of economic dispatch order versus other fossil fuel-fired power plants that have significant marginal costs. The Magat reservoir has the ability to store water equivalent to 17 days of 24 hours of full generating capacity. The flexibility of Magat Plant operation allows for the generation and sale of electricity at the peak demand hours of the day. Magat Plant’s source of upside-water as a source of fuel and the ability to store it-is also its source of limited downside. SN Aboitiz Power-Magat is an accredited provider of much needed Ancillary Services (AS) to the Luzon grid. It sells significant portion of its available capacity to the System Operator (SO) of the Luzon grid. SN Aboitiz Power - Magat’s remaining capacity is sold as electric energy to the spot market through the WESM and to load customers through bilateral contracts. In September 2007, SN Aboitiz Power-Magat obtained a US$380-mn loan from a consortium of international and domestic financial institutions which include the International Finance Corporation, Nordic Investment Bank, BDO–EPCI, Inc., Bank of the Philippine Islands, China Banking Corporation, Development Bank of the Philippines, The Hongkong and Shanghai Banking Corporation Limited, Philippine National Bank and Security Bank Corporation. The US$380-mn loan consists of a dollar tranche of up to US$152 mn, and a peso tranche of up to P10.1 bn. The financing agreement was hailed as the region’s first-ever project finance debt granted to a merchant power plant. It won Project Finance International’s Power Deal of the Year and Asset’s Best Project Finance Award as well as Best Privatization Award. The loan was used to partially finance the deferred balance of the purchase price of the Magat Plant under the APA


with PSALM. Part of the loan proceeds was also used to pay SN Aboitiz Power-Magat’s US$159-mn loan from AEV and the advances it made from its shareholders that were used to acquire the Magat Plant. In 2012, SN Aboitiz Power-Magat secured top-up financing of P5 bn for its recapitalization requirements and general corporate purposes. As a hallmark of innovation in revenue generation, SN Aboitiz Power-Magat garnered an AS contract on October 12, 2009 with the NGCP, a first for a privately-owned plant. These services are necessary to maintain power quality, reliability and stability of the grid. SN Aboitiz Power-Magat obtained the BOI approval of its application as new operator of the Magat Plant with a pioneer status, which approval entitles it to an income tax holiday (ITH) until July 12, 2013. On November 16, 2012, the BOI approved SN Aboitiz Power-Magat’s application for a one-year extension of its ITH holiday until July 11, 2014. After the lapse of SN Aboitiz Power-Magat’s ITH, it becomes subject to income tax. SN Aboitiz Power-Magat completed the half-life refurbishment of the last unit of the Magat HEPP (Unit 1) in June 2014. In 2009, SN Aboitiz Power-Magat began the refurbishment project with Unit 2. Work on Unit 4 followed in November 2010 and was completed in 2011, while the refurbishment of Unit 3 was completed in August 2013. The projects involved the replacement of power transformers and related equipment, as well as automation of its control systems. These aimed to overhaul the plant’s electro-mechanical equipment and avert operational inefficiencies that usually come after more than 25 years of operation. Half-life refurbishment is good industry practice to ensure that the power plant remains available through out its life span. SN Aboitiz Power-Magat’s sold capacity decreased by 19% in 2014 compared to 2013 mainly due to a 42% decrease in water inflow. AS sold capacity, however, was slightly higher by 2.2% in 2014 compared to 2013. SN Aboitiz Power-Magat was re-certified as AS provider in November 2014. In March 2013, SN Aboitiz Power-Magat and NGCP signed an AS Procurement Agreement (ASPA) for firm contracted capacities covering regulating and contingency reserves at 155 MW. The ASPA also provides for additional AS for the balance of SN Aboitiz Power-Magat Plant’s capacity and is valid for three years from the issuance of a provisional or final approval by the Energy Regulatory Commission (ERC). The ERC issued a Provisional Authority (PA) in relation to the new ASPA, paving the way for the implementation thereof starting July 26, 2013. SN Aboitiz Power-Magat filed a Motion for Reconsideration for the Magat ASPA, which remains unresolved while the final approval is still pending. SN Aboitiz Power Group’s Greenfield Development Program aims to grow its renewable portfolio by looking at potential hydro projects in the Philippines, primarily within its current host communities in northern Luzon. On December 2, 2013, SN Aboitiz Power-Greenfield, Inc. (SN Aboitiz Power-Greenfield) has secured Renewable Energy Service Contracts (RESCs) from the Department of Energy (DOE) for its proposed 6-MW Maris South Canal and 1.75-MW Maris North Canal mini-hydropower projects. The Maris projects are located downstream of the National Irrigation Administration (NIA)-owned and operated Maris dam and reservoir. The Maris dam and reservoir, which form the tailwater of the Magat HEPP, is situated at the boundary of Alfonso Lista, Ifugao and Ramon, Isabela. SN Aboitiz Power- Greenfield is currently waiting for the DOE approval on the assignment of the above RESCs to SN Aboitiz Power-Magat. NIA and SN Aboitiz Power - Magat signed a Memorandum of Understanding to develop both projects.


On July 24, 2014, one of SN Aboitiz Power Group’s project companies, SN Aboitiz Power-Ifugao, Inc., also secured RESCs for its proposed 350-MW hydropower complex project in Ifugao. This project is composed of three facilities: the 100- MW Alimit hydropower plant, the 240-MW Alimit pumped storage facility, and the 10-MW Olilicon hydropower plant. Both the Maris and Alimit projects are in the feasibility study stage. On November 4, 2014, SN Aboitiz Power-Magat and NIA held the ground-breaking ceremony for the optimization of the Maris Reservoir. Maris Optimization is a project of NIA with SN Aboitiz Power-Magat as its project partner. It aims to raise the Maris Reservoir by adding a set of stoplogs about three meters high. The project is expected to add some eight million cubic meters of storage, and will also entail refurbishment and improvements to the Maris dam structure for better irrigation water delivery and safety. Work is scheduled to begin in January 2015 and targeted for completion by first quarter of 2016. The Magat Plant passed the Certificated Audit for the second cycle of the ISO 18001 Environmental Management System in June 2014. It also maintained certification of its Quality Management System (ISO 9001) and Occupational Health & Safety Management System (OHSAS 14001) by passing the respective certification audits in September 2014. In 2014, SN Power and its affiliates (SN Power Group) underwent restructuring leading to the transfer by SN Power Holding Singapore Pte. Ltd. (SN Power Singapore) of its interests in SN Aboitiz Power Group to its affiliate, SN Power Netherlands. The restructuring of the SN Power Group was completed in October 2014 with respect to the SN Aboitiz Power Group. Consequently, SN Power Netherlands now holds interests in the SN Aboitiz Power-Magat, replacing SN Power Singapore. SN Aboitiz Power – Benguet, Inc. (SN Aboitiz Power-Benguet) SN Aboitiz Power-Benguet is a Subsidiary of MORE, which is 83.33% owned by ARI and 16.77% owned by SN Power Netherlands. Consequently, AboitizPower holds 50% interest in SN Aboitiz Power-Benguet. On November 28, 2007, SN Aboitiz Power-Benguet submitted the highest bid to PSALM for the Ambuklao-Binga hydroelectric power complex, which consisted of the 75-MW Ambuklao Plant and the 140-MW Binga Plant. The Ambuklao-Binga hydroelectric power complex was turned over to SN Aboitiz Power-Benguet on July 10, 2008. In August 2008, SN Aboitiz Power-Benguet signed a US$375-mn loan agreement with a consortium of local and foreign banks where US$160 mn was taken up as US Dollar financing and US$215 mn as peso financing. Proceeds from the loan were used to partially finance the purchase price, rehabilitate the power plant complex and refinance SN Aboitiz Power-Benguet’s existing advances from shareholders with respect to the acquisition of assets. Also in 2008, SN Aboitiz Power-Benguet began a massive rehabilitation project that restored Ambuklao Plant to operating status and increased its capacity from 75 MW to 105 MW. Ambuklao Plant had been decomissioned since 1999 due to siltation and technical issues as a result of the massive earthquake in 1990. Rehabilitation was completed in 2011. On the other hand, the Binga Plant also underwent refurbishment which began in 2010 and was completed in 2013. This refurbishment increased its capacity to 125 MW. It is now capable of generating up to 132 MW. The Binga Plant obtained an ITH extension from the BOI in 2014, which is effective until August 2015. The Ambuklao Plant also obtained an ITH extension on March 13, 2013, which is valid until July 2016.


The Ambuklao Plant re-operated in 2011 as a 105-MW power plant following its rehabilitation and upgrading from 2008 to 2011. The plant had been shut down and put under preservation since 1999 due to damage from the 1990 earthquake. Ambuklao Plant generated 328,682 MWh in 2014 and had a forced outage of 162.3 hours. Binga Plant, operating a full year after the completion of its refurbishment in 2013, generated 276,524 MWh and had a forced outage of only 32.78 hours. Even with lower water inflow in 2014, Binga Plant’s sold capacity increased by 26% (14.2% increase in spot energy generation and 31% increase in AS) from 2013 mainly due to improved water resource management. The capability of the Binga Plant as AS provider was re-certified in May 2014. Last year, the Binga Plant delivered 760.5 GWh of AS. On the other hand, the sold capacity factor of the Ambuklao Plant slightly decreased by 8% even if the water inflow to the reservoir decreased by 21%. In March 2013, SN Aboitiz Power-Benguet and NGCP signed an ASPA involving the Ambuklao Plant for firm contracted capacities covering regulating and contingency reserves at 95 MW. The ASPA also provides for additional ancillary reserved services for the balance of the Ambuklao Plant’s capacity. The ASPA is valid for three years from the issuance of a provisional or final approval by the ERC. Although a PA from the ERC has been obtained, the ASPA involving the Ambuklao Plant was not implemented due to some tests that need to be completed prior to the provision of AS at low loads. To date, the ERC has not yet issued a Final Approval on both Binga and Ambuklao ASPAs. Both Ambuklao and Binga Plants maintained their certifications for Quality Management System (ISO 9001), Environmental Management System (ISO 14001), and Occupational Health and Safety Management System (OHSAS 18001) through successful surveillance audits in 2014. In 2014, SN Power Group underwent restructuring leading to the transfer by SN Power Singapore of its interests in SN Aboitiz Power Group to its affiliate, SN Power Netherlands. The restructuring of the SN Power Group was completed in October 2014 with respect to the SN Aboitiz Power Group. Consequently, SN Power Netherlands now holds interests in the SN Aboitiz Power-Benguet, replacing SN Power Singapore. Luzon Hydro Corporation (LHC) Up until May 10, 2011, LHC was ARI’s joint venture with Pacific Hydro of Australia, a privately owned Australian company that specializes in developing and operating power projects that use renewable energy sources, principally water and wind power. At present, LHC is a wholly-owned Subsidiary of ARI. On March 31, 2011, ARI, LHC and Pacific Hydro signed a MOA to give ARI full ownership over LHC. Effective May 10, 2011, ARI assumed full ownership and control of LHC upon fulfillment of certain conditions in the MOA. LHC operates and manages the 70-MW Bakun AC run-of-river hydropower plant located in Amilongan, Alilem, Ilocos Sur (Bakun Plant). The hydropower plant was constructed and is being operated under the Government’s BOT scheme. Energy produced by Bakun Plant, approximately 254 GWh annually, is delivered and taken up by NPC pursuant to a PPA (Bakun PPA) and dispatched to the Luzon grid through 230-KV Bauang-Bakun transmission line of the NGCP. Under the terms of the Bakun PPA, all of the electricity generated by Bakun Plant will be purchased by NPC for a period of 25 years from February 2001. The Bakun PPA also requires LHC to transfer the Bakun Plant to NPC in February 2026, free from liens and without the payment of any compensation by NPC. Amlan Power Holdings Corporation was awarded the IPPA contract for the Bakun Plant following a competitive bidding process conducted by PSALM.


After securing consent from NPC, the Bakun Plant was shut down for the repair of approximately 900 meters of unlined tunnel. The rehabilitation was completed in September 2012. Hedcor, Inc. (Hedcor) Hedcor is a wholly-owned Subsidiary of ARI. It was originally incorporated on October 10, 1986 by ACO as the Baguio- Benguet Power Development Corporation. ARI acquired ACO’s 100% ownership interest in Hedcor in 1998. In 2005, ARI consolidated all of its mini-hydroelectric generation assets, including those developed by HEDC and Cleanergy, in Hedcor. Hedcor currently owns, operates and/or manages run–of–river hydropower plants in northern Luzon and Davao with a combined installed capacity of 42 MW. The electricity generated from Hedcor’s hydro plants are taken up by NPC, APRI, Davao Light and Benguet Electric Cooperative (BENECO) pursuant to Power Purchase Agreements (PPA) with the said off-takers, and the rest are sold through the WESM. During the full years 2013 and 2014, Hedcor’s hydropower plants generated a total of 160 GWh and 156 GWh of electricity, respectively. Northern Luzon’s climate is classified as having two pronounced seasons-dry from November to April and wet for the rest of the year. Due to this classification, generation levels of Hedcor’s plants, particularly those located in northern Luzon, are typically lower during the first five months of each year. Hedcor used to have 50% equity interest in LHC until it transferred its equity stake to its parent company, ARI, through a property dividend declaration in September 2007.

Hedcor Sibulan, Inc. (Hedcor Sibulan) Hedcor Sibulan's capital stock is held by ARI and AboitizPower at 94% and 6%, respectively, resulting in AboitizPower's 100% effective interest therein. It is the project company of the Sibulan hydropower project (Sibulan Project). The Sibulan Project, which broke ground on June 25, 2007, entailed the construction of two run-of-river hydropower plants, Sibulan A and Sibulan B, harnessing the Sibulan and Baroring rivers in Santa Cruz, Davao del Sur. The 26 MW Sibulan B plant started commercial operations in March 2010. The 16.5 MW Sibulan A plant was completed in September 2010. Hedcor Sibulan is part of a consortium that won the competitive bidding for the 12-year PSA to supply new capacity to Davao Light. All the energy generated by Hedcor Sibulan power plants are supplied to Davao Light pursuant to the PSA signed on March 7, 2007. The Sibulan Project is registered as a Clean Development Mechanism (CDM) project with the United Nations Framework Convention on Climate Change (UNFCCC) under the Kyoto Protocol. The Sibulan Project was issued 136,000 tons of carbon credits, which will eventually be sold in the carbon market. Hedcor Sibulan delivered a total of 231 GWh to the Mindanao Grid in 2012. Hedcor Sibulan is also the project company of the 6.7 MW Tudaya 1 hydropower plant (Tudaya 1). Tudaya 1 is now commercially operating after receiving the Certificate of Compliance (COC) from the ERC. The energy produced by Tudaya 1 is sold to Davao Light through a PSA signed in 2007.

Hedcor Tamugan, Inc. (Hedcor Tamugan) Hedcor Tamugan, a wholly-owned Subsidiary of ARI, is effectively 100% owned by AboitizPower. It is the project company organized to build the proposed Tamugan run-


of-river hydropower project. In 2010, Hedcor Tamugan entered into a compromise agreement with the Davao City Water District to settle the dispute on the Tamugan water rights. Originally planned as a 27.5 MW run-of-river facility, Hedcor Tamugan proposed the construction of a 12 MW hydropower plant. After Hedcor Tamugan secures all the required permits, the two-year construction period will commence. Hedcor Tudaya, Inc. (Hedcor Tudaya) Hedcor Tudaya's capital stock is held by ARI and AboitizPower at 50% and 50%, respectively, resulting in AboitizPower's 100% effective interest therein. Hedcor Tudaya is the project company organized to build the 7-MW Tudaya 2 run-of-river hydropower plant in Astorga, Santa Cruz, Davao del Sur. The project is now commercially operating. The plant, which is intended to sell through the Feed-in-Tariff (FIT) mechanism, obtained its FIT eligibility certificate. A composite team from the DOE validated the eligibility of Tudaya 2 as a FIT-eligible plant. Upon issuance of the FIT-Eligible COC from the ERC, Hedcor Tudaya will sell to Davao del Sur Electric Cooperative through FIT mechanism. Hedcor Sabangan, Inc. (Hedcor Sabangan) Hedcor Sabangan's capital stock is held by ARI and AboitizPower at 16% and 84%, respectively, resulting in AboitizPower's 100% effective interest therein. Hedcor Sabangan is the project company organized to build the proposed 14-MW run-of-river hydropower project in Sabangan, Mountain Province. As part of the process of getting Free Prior and Informed Consent (FPIC) for the project required under the Indigenous Peoples’ Rights Act of 1997 (IPRA), Hedcor Sabangan signed a MOA with the indigenous peoples of Barangays Namatec and Napua, the municipality of Sabangan and the Mountain Province in February, March and July 2011. The project broke ground in June 2013, after it was granted all the permits and licenses in the first quarter of 2013. The estimated cost for this project is π1.7 bn. The project was awarded the Confirmation of Commerciality as FIT Eligible plant by the DOE under Department Circular 2013-05-0009 pursuant to the RE Law. Hedcor Sabangan intends to avail of the FIT mechanism. The plant is scheduled to be tested and commissioned in March 2015.

Hedcor Bukidnon, Inc. (Hedcor Bukidnon) Hedcor Bukidnon's capital stock is held by ARI and AboitizPower at 10% and 90%, respectively, resulting in AboitizPower's 100% effective interest therein. Hedcor Bukidnon is the project company for the proposed 68-MW Manolo Fortich hydropower plant project. The project is composed of the 43-MW Manolo Fortich 1 and the 25-MW Manolo Fortich 2 plants which shall be located in the province of Bukidnon. Both plants are expected to produce at least 300 mn kWh annually. The estimated total project cost is at P13 bn. The construction of the Manolo Fortich project has already begun in 2014 and is expected to be concluded by the end of 2016. AP Solar Tiwi, Inc. (AP Solar) On November 12, 2014, ARI signed a joint framework agreement with SunEdison, Inc. (SunEdison) to jointly explore, develop, construct and operate up to 300 MW of utility-


scale solar photovoltaic power generation projects in the Philippines over the next few years. AP Solar is the first project company that will undertake this project. Originally incorporated as a wholly-owned Subsidiary of ARI, the parties are currently negotiating an agreement to allow SunEdison to join AP Solar to realize the parties' vision of bringing cost effective solar energy to the Philippines.

Therma Power, Inc. (TPI)

TPI is AboitizPower’s holding company for its non-renewable energy projects. AboitizPower, either directly and/or through TPI, has equity interests in the following generation companies:

• 100% equity interest in TLI, the IPPA of the 700-MW contracted capacity of the Pagbilao Plant in Quezon Province;

• 100% equity interest in TMI, owner and operator of 100-MW Mobile 1 barge-mounted power plant in Maco, Compostela Valley and 100-MW Mobile 2 barge-mounted power plant in Nasipit, Agusan del Norte;

• 100% equity interest in TMO, owner and operator of Mobile 3-6 barge-mounted power plants in Navotas Fishport, Manila, with a total generating capacity of 242 MW;

• 100% equity interest in TSI, which is currently building a 300 MW circulating fluidized bed (CFB) coal-fired power plant in Toril, Davao City;

• 80% equity interest in TVI, which is currently building a 300-MW, coal-fired power plant in Toledo City, Cebu;

• 26.4% effective interest in Cebu Energy, which operates a 3x82-MW coal-fired power plant in Toledo City, Cebu;

• 50% equity interest in PEC, which is currently building a 420-MW, coal-fired power plant in Pagbilao, Quezon Province;

• 25% equity interest in RP Energy, which proposes to build and operate a 600-MW coal-fired power plant in the Redondo Peninsula in the SBFZ.; and

• 100% equity interest in TPVI, the project company that bidded for the privatization of the Naga power plant, located in Naga City, Cebu.

Therma Luzon, Inc. (TLI) TLI, a wholly-owned Subsidiary of TPI, is effectively 100% owned by AboitizPower. TLI submitted the highest offer in the competitive bidding conducted by PSALM for the appointment of an IPPA for the 700-MW contracted capacity of Pagbilao coal-fired thermal power plant located in Pagbilao, Quezon (Pagbilao Plant). On October 1, 2009, TLI became the first IPPA in the country when it assumed the role of the registered trader of the contracted capacity of the Pagbilao Plant. As IPPA, TLI is responsible for procuring the fuel requirements of and selling the electricity generated by the Pagbilao Plant. The Pagbilao Plant is being operated by TeaM Energy under a BOT scheme with NPC/PSALM. The IPPA agreement includes the obligation of TLI to pay to PSALM monthly payments based on the bid and energy fees equivalent to the amount paid by NPC to the Independent Power Producer. Under the IPPA agreement, TLI has the right to receive the transfer of the existing two units of the Pagbilao Plant at the end of the IPPA agreement. As such, the company acquired substantial risks and rewards incidental to the IPPA agreement. Accordingly, the company accounted for the agreement as a finance lease and recognized the power plant and finance lease obligation at the present value of the agreed monthly payments to PSALM. The power plant is depreciated over its estimated useful life as there is reasonable certainty that the company will obtain ownership by the end of the lease term.


Over the past two years, TLI’s capacity was contracted to various cooperatives, private distribution utilities, directly-connected customers, and an affiliated RES, AESI. AESI, in turn, sells the power to contestable customers under the Open Access regime. The diversification of the customer base spreads the risk of TLI. Most of these bilateral contracts have terms ranging between three to 20 years. A significant number of TLI’s Open Access customers consume most of their energy during off-peak periods. This results in a customer mix with a high load factor. A high load factor customer base is operationally easier to provide for due to the minimal fluctuation of plant production and the very predictable fuel consumption, and therefore easier fuel procurement. On February 26, 2010, the BOI approved TLI’s application as a New IPPA of the 700 MW Pagbilao Coal Fired Thermal Power Plant Project under Energy with Non-Pioneer Status under the Omnibus Investments Code of 1987. On April 21, 2010, the BOI granted the company’s request for the adjustment of the commencement of its ITH availment period from February 26, 2010 to January 1, 2010. Among other incentives, the BOI granted the company an ITH for a period of four years without extension from January 1, 2010 or actual start of operation, whichever is earlier but in no case earlier than the date of registration. The ITH incentives shall be limited only to the sales/revenue generated from the sale of electricity of the power plant. Based on this schedule, TLI will be subject to a 30% corporate income tax beginning January 2014. In March 2013, TLI signed an ASPA with NGCP covering firm contracted capacities for contingency reserves at 60 MW during off-peak hours for the Pagbilao plant. The ASPA is valid for five years from the issuance of a provisional or final approval by the ERC. A PA from the ERC has been obtained, paving the way for the implementation of TLI’s new ASPA for the Pagbilao Plant starting July 26, 2013. Nominations and acceptance of nominations is subject to renewal of the accreditation of the Pagbilao Plant as an ancillary service provider. Therma Marine, Inc. (TMI) TMI, a wholly-owned Subsidiary of TPI, is effectively 100% owned by AboitizPower. It owns and operates Power Barges Mobile 1 (previously known as PB 118) and Mobile 2 (previously known as PB 117), which have a total generating capacity of 200 MW. Mobile 1 is currently moored at Barangay San Roque, Maco, Compostela Valley, while Mobile 2 is moored at Barangay Sta. Ana, Nasipit, Agusan del Norte. TMI assumed ownership of Mobile 1 and Mobile 2 from PSALM on February 6, 2010 and March 1, 2010, respectively, after the successful conclusion of the US$30 mn negotiated bid for the barges on July 31, 2009. After acquisition, TMI signed a one-year ASPA with NGCP with respect to each barge for the supply of AS consisting of contingency reserve, dispatchable reserve, reactive power support and blackstart capacity for the Mindanao grid. The ASPA involving the power barges is for the supply of 50-MW firm ancillary power to NGCP. The contracts were extended for another year and expired on February 5, 2012 and March 1, 2012 for Mobile 1 and Mobile 2, respectively. The 192.2-MW dependable capacities of TMI are currently being fully contracted and sold to various cooperatives, industrial and commercial customers in Mindanao under Energy Supply Agreements (ESAs), all of which were approved by the ERC. All ESAs are still outstanding and the new expiry dates will be in 2016 to 2017 with the recent contract extensions. Some contract extensions are still pending with ERC for approval. TMI was registered with BOI effective May 28, 2010 with a four-year ITH validity which expired in May 27, 2014. Upon the expiration of the BOI registration, all benefits granted to TMI expired, thus making TMI subject to regular tax rates.


Therma Mobile, Inc. (TMO)

TMO's capital stock is held by TPI and AboitizPower at 77% and 23%, respectively, resulting in AboitizPower's 100% effective interest therein. TMO acquired four barge-mounted floating power plants located at Navotas Fishport, Manila on May 27, 2011. The barge-mounted floating power plants have an installed generating capacity of 242 MW. The barges have undergone rehabilitation starting July 2011, and commercial operations began on November 12, 2013 at a capacity of 100 MW. The current dependable capacity of 200 MW was attained and proven in a successful capacity test in April 2014. Therma South, Inc. (TSI) TSI's capital stock is held by TPI and AboitizPower at 94% and 6%, respectively, resulting in AboitizPower's 100% effective interest therein. Incorporated on November 18, 2008, TSI is the project company for the construction of the 300-MW CFB coal-fired power plant in Barangay Binugao, Toril District, Davao City and Barangay Inawayan, Sta. Cruz, Davao del Sur. Through TSI’s close engagement and consultation with key stakeholders, including the conduct of dialogues, road shows and information drives, the company has carefully explained the urgent need to build the plant in order to alleviate the worsening power supply situation in Davao City and the entire Mindanao. It also gave firm assurances that the construction and operations of the plant will meet stringent national and international emission standards. These efforts led to the strong support for the project by the host barangays, business, professional organizations and civic groups. Ultimately, the project received the overwhelming endorsement of the LGUs in the city of Davao and the municipality of Sta. Cruz in Davao del Sur. On September 9, 2011, the Department of Environment and Natural Resources–Environmental Management Bureau (DENR–EMB) issued the ECC for the power plant project. In August 2011, TSI acquired the land where the plant will be located. On February 15, 2012, the Department of Agrarian Reform released the Conversion Order for the land. On April 10, 2012, upon receipt of all necessary permits, the site preparation contractor began clearing the site. In June 2012, the EPC contracts were executed with the Power Island contractor and the Balance of Plant contractor with an effective project start date of June 1, 2012. As of December 2014, the construction progress of the above-mentioned power plant continues to be on track. The overall project is approximately 94% complete, with ongoing commissioning activities since the second quarter of 2014 and back-feed power beginning January of 2015. Construction staff is 1,300, many of whom are residents of the local communities around the plant site. The construction of the first plant (with capacity of 150 MW) is on schedule and is expected to become operational in the first quarter of 2015. The second plant (with capacity of 150 MW) will be operational within three months thereafter. On October 16, 2013, TSI secured a P24 bn loan from a consortium of banks to finance the construction and operation of the plant. BDO Capital & Investment Corporation acted as Issue Manager and Lead Arranger, while BDO Unibank, Inc.-Trust and Investments Group was appointed as Trustee and Facility Agent.


On March 18, 2014, Davao City’s legislative council has approved a resolution that will allow TSI to expand its capacity from 300 MW to 645 MW. Therma Visayas, Inc. (TVI) TVI is 42% directly owned by TPI and 38% directly owned by AboitizPower. Consequently, AboitizPower holds 80% effective interest in TVI. TVI is the project company of the 2x150 CFB coal-fired power plant in Barangay Bato, Toledo City, Cebu. It was incorporated on October 15, 1997 as Vesper Industrial & Development Corporation, a joint venture company of A. Soriano Corporation (Anscor) and Tokuyama Corporation (Tokuyama). In December 2011, AboitizPower through its Subsidiary, TPI, acquired all shares of Anscor and Tokuyama and thereafter renamed the company to TVI. Vivant Group acquired 20% interests in TVI through subcription from its increase in authorized capital stock which was approved by the Securities and Exchange Commission (SEC) on December 23, 2014. The project aims to address the increasing power demand of the Visayas grid, with provisions for the future addition of a third generating unit. Commercial operation of the first unit is expected to start by last quarter of 2017 with the second unit following three months thereafter. In 2013, TVI received the ECC for the project and completed a Grid Impact Study which has been approved by the NGCP. It also completed the collection of physical data at the project site in late 2012, including topography, hydrography, onshore and offshore subsurface investigations, and other tests. In May 2014, TVI signed an EPC contract with Hyundai Engineering Co., Ltd. and Galing Power Energy Co., Inc. TVI has also issued a Limited Notice to Proceed to perform design engineering and detailed physical data collection in preparation for the construction plant. TVI plans to issue the full Notice to Proceed by March 2015 in order to have a guaranteed completion date by the last quarter of 2017. Abovant Holdings, Inc. (Abovant) and Cebu Energy Development Corporation (Cebu Energy) Incorporated on November 28, 2007, Abovant is a joint venture company formed to hold investments in Cebu Energy. Abovant is 60% owned by TPI and 40% owned by VIGC of the Garcia group. Abovant and Global Formosa Power Holdings, Inc. (Global Formosa), a joint venture between Global Business Power Corporation of the Metrobank group and Formosa Heavy Industries, Inc., formed Cebu Energy to own, operate and maintain a 3x82 MW CFB coal-fired power plant situated within the Toledo Power Complex in Barangay Daanlungsod, Toledo City, Cebu. Abovant has a 44% stake in Cebu Energy, while Global Formosa owns the remaining 56% stake. Consequently, AboitizPower holds 26.4% effective interest in Cebu Energy. In 2012, the Cebu Energy power plant in Toledo City completed its first full year of commercial operations. The first 82-MW unit was commissioned in February 2010; while the second and third units were commissioned in the second and fourth quarter of 2010, respectively. The said power plant provides the much-needed security of the power supply of the province of Cebu and its neighboring province, Bohol. Cebu Energy


also supplies power to Global Energy Supply Corporation, a RES that supplies electricity to Taiheiyo Cement Philippines, Inc. Pagbilao Energy Corporation (PEC) PEC is 50% owned by TPI and 50% owned by TPEC Holding Corporation. Consequently, AboitizPower holds 50% effective interest in PEC. TPI and TeaM Energy entered into a Joint Development Agreement effective May 31, 2012 to develop, own and operate a third generating unit with a net capacity of 400 MW within the Pagbilao Plant facilities which already provided for the possibility of this new unit. PEC was formed as a separate vehicle for the third unit (Pag3) and is intended to be a separate entity from TLI. PEC is not covered by either TLI’s IPPA with PSALM, or TeaM Energy’s BOT contract with NPC/ PSALM. An ECC was issued by the DENR-EMB on June 18, 2013. In May 2014, PEC entered into an EPC contract with a consortium comprised of Mitsubishi Hitachi Power Systems Ltd., Daelim Industrial Co. Ltd., DESCO Inc. and Daelim Philippines Inc. for the project. PEC also signed an Omnibus Agreement to finance the construction of PEC with a consortium of lender-banks to obtain loans and credit accommodations in the amount of up to P33.31 bn. Site construction activities are in progress in line with PEC’s target commercial operations within 2017. Redondo Peninsula Energy, Inc. (RP Energy) RP Energy is 25% owned by TPI resulting in AboitizPower's 25% effective interest therein. Incorporated on May 30, 2007, RP Energy was originally a joint venture between AboitizPower and Taiwan Cogeneration International Corporation (TCIC). On July 22, 2011, MPGC acquired a majority interest in RP Energy by virtue of a share purchase agreement with TPI, a wholly-owned Subsidiary of AboitizPower. AboitizPower and TCIC retained an equal ownership interest of 25% less one share each. In view of increasing power demand in the Luzon grid and with the entry of MPGC, RP Energy expanded its original proposal to build and operate a 300-MW coal-fired power plant on Redondo Peninsula of Subic Bay within the SBFZ into a 2x300-MW (net) power plant. RP Energy has completed the voluntary relocation of all affected residents in the site in accordance with existing Philippine rules and regulations and accepted international standards. In November 2011, RP Energy designated the suppliers of the CFB boilers, steam turbines, generators and supporting auxiliaries that ultimately will be engaged as subcontractors by the selected engineering, procurement and construction (EPC) contractor. Several milestones were achieved by RP Energy in the year 2012. The company’s discussions with the SBMA on certain improvements of the key provisions of the Lease Development Agreement (LDA) have been substantially completed. The BOI also issued a Notice of Approval in favor of RP Energy for its application for registration with incentives, subject to RP Energy’s acceptance of certain conditions set by the BOI. To date, RP Energy has submitted its concurrence to such conditions and is awaiting for the formal registration of the project with the BOI. On November 15, 2012, RP Energy was issued an amended Environmental Compliance Certificate (ECC) to cover two high-efficiency 300-MW (net) units with main steam reheat systems. Site preparation was substantially completed. The EPC contract has been awarded to Hyundai Engineering and Construction Co. Ltd. (Hyundai) with Foster


Wheeler Ltd. (Foster Wheeler) and Toshiba Corporation (Toshiba) as major subcontractors/suppliers of the CFB boilers and turbines, respectively. Hyundai has not been notified to proceed with the works, however, because of the filing with the Supreme Court of a Petition for Writ of Kalikasan and Environmental Protection Order by an ad hoc group of individuals and organizations. The Petition was remanded to the Court of Appeals (CA) for a hearing. The CA denied the issuance of Writ of Kalikasan for lack of merit, but nonetheless, nullified RP Energy’s ECC and land lease with SBMA’s on the grounds of DENR’s non-compliance with procedural requirements and SBMA failure to secure approvals andendorsements from relevant local government units (LGUs). The CA decision became the subject of three Petitions for Review on Certiorari filed by RP Energy, DENR and SBMA with the Supreme Court. In view of this legal dispute, the commercial operation of the power plant became dependent on the final resolution of these Petitions by the Supreme Court. On February 3, 2015, the SC dismissed the Writ of Kalikasan Case for insufficiency of evidence and upheld the validity of the December 22, 2008 ECC issued by the DENR in favor of RP Energy, as well as its July 8, 2010 first amendment and the May 26, 2011 second amendment. The SC also upheld the validity of the Lease and Development Agreement between SBMA and RP Energy dated June 8, 2010. RP Energy received three major awards from Philippine Quill Awards and bagged the Anvil Awards for its corporate social responsibility and public relations initiatives for its stakeholders in 2012. STEAG State Power, Inc. (STEAG Power) Incorporated on December 19, 1995, STEAG Power is the owner and operator of a 232-MW (gross) coal-fired power plant located in PHIVIDEC Industrial Estate in Misamis Oriental, Northern Mindanao. The coal plant was built under a BOT arrangement and started commercial operations on November 15, 2006. The coal plant is involved in a 25-year PPA with the NPC, which is backed by a Performance Undertaking issued by the Republic of the Philippines. On November 15, 2007, AboitizPower closed the sale and purchase of 34% equity ownership in STEAG Power from Evonik Steag GmbH (now STEAG GmbH or STEAG), Germany’s fifth largest power generator. STEAG and La Filipina Uy Gongco Corporation currently holds the remaining 51% and 15% equity, respectively, in STEAG Power. STEAG Power was registered with the BOI as a pioneer enterprise with a six-year ITH incentive. The incentive expired on November 14, 2012. STEAG Power’s COC, on the other hand, was renewed by the ERC and is now effective until May 2016. East Asia Utilities Corporation (EAUC) EAUC was incorporated on February 18, 1993. It has been operating a Bunker C-fired power plant (with an installed capacity of 50 MW) within MEPZ I in Mactan Island, Cebu since 1997. Pursuant to the Electric Power Purchase Agreement (EPPA) with the PEZA, which took effect on April 26, 2011, PEZA shall purchase 22 MW of power from EAUC. EAUC also signed an EPPA with BEZ for the supply of power equivalent to 5.255 MW for a period of five years, starting May 25, 2011 until May 25, 2016. On December 26, 2010, EAUC started supplying power through the WESM. AboitizPower acquired its 50% ownership interest in EAUC from El Paso Philippines on April 20, 2007. El Paso still owns the remaining 50% interest in EAUC.


Cebu Private Power Corporation (CPPC) Incorporated on July 13, 1994, CPPC owns and operates a 70-MW Bunker C-fired power plant, one of the largest diesel powered plants on the island of Cebu. Commissioned in 1998, the CPPC plant was constructed pursuant to a BOT contract to supply 62 MW of power to VECO. AboitizPower acquired 60% interest in CPPC from EAUC on April 20, 2007. VEC holds the remaining 40% of the outstanding common shares in CPPC, while VECO owns all of CPPC’s redeemable preferred shares. VEC and AboitizPower are the major shareholders of VECO. CPPC is embedded inside the franchise area of VECO. On December 26, 2010, CPPC started selling its excess capacity through the WESM. On July 16, 2013, CPPC and VECO filed an application for a new PSA with the ERC, which contemplates a slightly lower electricity rate than its existing rate. It shall take effect upon approval of the ERC and shall expire ten years thereafter. Southern Philippines Power Corporation (SPPC) SPPC is a joint venture among AboitizPower, Alsing Power Holdings, Inc. and Tomen Power (Singapore), Pte. Ltd. AboitizPower has 20% equity interest in SPPC, which owns and operates a 55-MW Bunker C-fired power plant in Alabel, Sarangani, a town located outside General Santos City in Southern Mindanao (SPPC Plant). The SPPC Plant was developed by SPPC on a build-own-operate basis under the terms found in its Energy Conversion Agreement (ECA) with NPC. Under the ECA, NPC is required to deliver and supply to SPPC the fuel necessary to operate the SPPC Plant during an 18-year cooperation period, which ends in 2016. NPC is also required to take all the electricity generated by the SPPC Plant during the cooperation period and pay SPPC on a monthly basis, capital recovery, energy, fixed operations and maintenance (O&M), and infrastructure fees as specified in the ECA. During this cooperation period, SPPC is responsible, at its own cost, for the management, operation, maintenance and repair of the SPPC Plant. Aside from providing the much needed capacity to southwestern Mindanao area, the SPPC Plant also performs the role of voltage regulator for General Santos City, ensuring the availability, reliability and quality of power supply in the area. Western Mindanao Power Corporation (WMPC) Like SPPC, WMPC is also a joint venture among AboitizPower, Alsing Power Holdings, Inc. and Tomen Power (Singapore), Pte. Ltd. AboitizPower has 20% equity interest in WMPC, which owns and operates a 100-MW Bunker C-fired power station located in Zamboanga City, Zamboanga Peninsula in Western Mindanao (WMPC Plant). The WMPC Plant was developed by WMPC on a build-own-operate basis under the terms found in its ECA with NPC. Under the ECA, NPC is required to deliver and supply to WMPC the fuel necessary to operate the WMPC Plant during an 18-year cooperation period which ends in 2015. NPC is also required to take all the electricity generated by the WMPC Plant during the cooperation period and pay WMPC on a monthly basis, capital recovery, energy, fixed O&M, and infrastructure fees as provided in the ECA. During this cooperation period, WMPC is responsible, at its own cost, for the management, operation, maintenance and repair of the WMPC Plant.


Aside from providing the much needed capacity to Zamboanga Peninsula, the WMPC Plant also performs the role of voltage regulator for Zamboanga City, ensuring the availability, reliability and quality of power supply in the area.

Other Generation Assets Two of AboitizPower’s distribution utilities, Davao Light and Cotabato Light, each has its own stand-by power plant. Davao Light currently maintains the Bunker C-fired Bajada stand-by power plant, which is capable of supplying 19% of Davao Light’s requirements. Cotabato Light maintains a stand-by Bunker C-fired power plant capable of supplying approximately 36% of its requirements. Future Projects Before undertaking a new power generation project, AboitizPower conducts an assessment of the proposed project. Factors taken into consideration include the proposed project’s land use requirements, access to a power grid, fuel supply arrangements (if relevant), availability of water, local requirements for permits and licenses, acceptability of the project to the communities and peoples it will affect, ability of the project to generate electricity at a competitive cost, and the existence of potential purchasers of the electricity generated. For the development of a new power project, AboitizPower, its partners and suppliers are required to obtain all national and local permits and approvals before the commencement of construction and commercial operations, including those related to the project site, construction, the environment, land use planning/zoning, operations licenses, and similar approvals. Notwithstanding the comprehensive review and evaluation process that AboitizPower’s management conducts in relation to any proposed project, acquisition or business, there can be no assurance that AboitizPower will ultimately develop a particular project, acquire a particular generating facility, implement or acquire projects, or conduct businesses in the manner planned at or below their estimated costs. In addition, there can be no assurance that a project, if implemented, or an acquisition, if undertaken, will be successful. DISTRIBUTION OF ELECTRICITY The Aboitiz Group has more than 80 years of experience in the Philippine power distribution sector and has been known for innovation and efficient operations. With ownership interests in eight Distribution Utilities, AboitizPower is currently one of the largest electricity distributors in the Philippines. AboitizPower’s Distribution Utilities collectively supply electricity to franchise areas covering a total of 18 cities and municipalities in Luzon, Visayas and Mindanao. As of December 31, 2014, approximately 19% of AboitizPower’s net income from business segments is derived from its power distribution business. The Distribution Utilities had a total customer base of 843,802 in 2014, 809,087 in 2013 and 766,988 in 2012. The table below summarizes the key operating statistics of the Distribution Utilities for 2014 and the previous two years.


Company

Electricity Sold (MWh)

Peak Demand (MWh) No. of Customers

2014 2013 2012 2014 2013 2012 2014 2013 2012 Davao Light 1,981,258 1,770,738 1,680,477 344 324 295 331,998 315,886 303,135

Cotabato Light 119,571 121,231 117,538 23 25 23 36,297 35,137 33,931

VECO 2,527,846 2,417,353 2,300,959 459 433 412 380,851 366,606 341,611

SFELAPCO 537,544 523,789 493,565 99 99 90 91,504 88,464 85,405

SEZ 451,448 388,562 403,250 96 91 90 2,946 2,881 27,797

MEZ 123,207 118,252 122,660 22 21 21 82 80 78

BEZ 107,253 113,708 124,299 28 33 33 34 33 31

Lima Enerzone 126,524 - - 22 - - 90 - -

Total 5,974,651 5,453,633 5,242,748 1,093 1,026 964 843,802 809,087 766,988

Visayan Electric Company, Inc. (VECO) VECO is the second largest privately-owned distribution utility in the Philippines in terms of customers and annual MWh sales. VECO supplies electricity to a region covering 674 square kilometers in the island of Cebu with a population of approximately 1.7 mn. To date, VECO has 20 power substations and one mobile substation that serve the electrical power needs of the cities of Cebu, Mandaue, Talisay and Naga, the municipalities of Minglanilla, San Fernando, Consolacion and Liloan and the 232 barangays in the island and province of Cebu. As of December 2014, VECO’s peak demand was recorded at 459 MW and is serving a total of 380,851 customers. VECO, directly and through its predecessors-in-interest, has been in the business of distributing electricity in Cebu since 1905. In the early 1900s, the predecessors-in-interest of the Aboitiz Group acquired a 20% interest in VECO’s predecessor-in-interest, the Visayan Electric Company, S.A. Since that time, the Aboitiz Group’s ownership interest in VECO has increased from 20% to its current ownership interest of 55.25%, which is held by AboitizPower. In 1928, Visayan Electric Company, S.A. was granted a 50-year distribution franchise by the Philippine Legislature. The term of this franchise was extended by Republic Act (RA) 6454 for an additional 25 years starting 1978 and was conditionally renewed for another 25 years from December 2003, subject to the resolution of an intra-corporate dispute involving AEV and Vivant Corporation (Vivant), which is the holding company of the Garcia family. In September 2005, the Philippine Congress passed RA 9339, which extended VECO’s franchise to September 2030. VECO’s application for the extension of its Certificate of Public Convenience and Necessity (CPCN) was approved by the ERC on January 26, 2009. In April 2004, AEV and Vivant entered into a Shareholders’ Cooperation Agreement that sets out guidelines for VECO’s day-to-day operations and the relationship among VECO’s shareholders, including restrictions on share transfers (the grant of rights of first refusal in the event of a transfer to a third party and rights to transfer to Affiliates, subject to certain conditions), board composition and structure, proceedings of directors and shareholders, minority shareholder rights, dividend policy, termination and non-compete obligations. Under the terms of the agreement, day-to-day operations and management of VECO were initially assumed by AEV, and by AboitizPower after it


acquired AEV’s ownership interest in VECO in January 2007. AboitizPower and Vivant were each required to place in escrow 5% of the shares in VECO registered in their names to guarantee compliance with their respective obligations under the Shareholders’ Cooperation Agreement. The escrow shares will be forfeited in the event that a shareholder group violates the terms of the Shareholders’ Cooperation Agreement. The Shareholders’ Cooperation Agreement was adopted as a result of the then dispute between AEV and Vivant with respect to the management of VECO. Relations between the shareholders of VECO since then have been amicable. VECO is part of the third group (Group C) of private distribution utilities to shift to performance-based rate-setting regulation (PBR). The ERC issued its final determination on VECO’s application for approval of its annual revenue requirements and Performance Incentive Scheme (PIS) under the PBR for the regulatory period July 1, 2010 to June 30, 2014. Such determination became final in May 2010. In March 2013, VECO filed with the ERC an application for the approval of its proposed translation into distribution rates to the different customer classes for the fourth regulatory year. The five-month recovery due to the delay of the implementation in the third regulatory year is included in the application for the fourth regulatory year. The application was approved by the ERC on July 10, 2013 and VECO was able to implement the new distribution rates on time. The approved distribution rates for the fourth regulatory year were to be applicable only for July 2013 up to June 2014 billings. In the first quarter of 2014, VECO was scheduled to undergo the PBR reset process to ensure that the new rates would be approved and can be applied by July 2014. However, the ERC has since put on hold all PBR reset processes. VECO has since continued to apply the rates approved for the fourth regulatory period even beyond June 2014. VECO’s 120-MW Contract for the Supply of Electric Energy (CSEE) with NPC/PSALM expired on December 25, 2014. NPC/ PSALM privatized its ULGPP and turned over the power supply to its new owners starting December 26, 2014. As a replacement for the expired NPC/PSALM contract, VECO contracted 57 MW of base load from the new owners of the power output of the ULGPP. An additional 30 MW of peaking supply was contracted from 1590 Energy Corporation, a diesel power plant located in the province of La Union in Luzon. Davao Light & Power Company, Inc. (Davao Light) Davao Light is the third largest privately-owned electric distribution utility in the country in terms of customers and annual kWh sales. With a franchise covering Davao City, certain areas of Panabo City, and the municipalities of Carmen, Dujali and Santo Tomas in Davao del Norte, Davao Light serves a population of approximately 1.8 mn and a total area of 3,561 square kilometers. As of December 2014, Davao Light’s peak demand was recorded at 344 MW, and is serving a total of 331,998 customers. Although Davao Light was organized on October 11, 1929, the Aboitiz Group acquired its ownership only in 1946. Currently, AboitizPower owns 99.93% of the shares in Davao Light. Davao Light’s original franchise, which covered Davao City, was granted in November 1930 by the Philippine Legislature and was for a period of 50 years. In September 2000, the Philippine Congress passed RA 8960, which granted Davao Light a franchise over its current franchise area for a period of 25 years, or until September 2025. Davao Light has a 150-MVA and a 2x50-MVA substation drawing power at 138 kV. In 1998, it entered into a ten-year PPA with NPC, which was further extended until 2015 by a separate contract entered into by the parties in 2005. The PPA with NPC allows the delivery of most of Davao Light’s power requirements through its 138-kV lines. As a result, in taking delivery of electricity from NPC, Davao Light is able to bypass the NGCP


connection assets, thus avoiding the payment of the corresponding wheeling fees to NGCP. This allows the company to cut its operating costs. In February 2007, Davao Light awarded a 12-year supply contract of new capacity to Hedcor Consortium, the consortium of Hedcor, ARI, Hedcor Sibulan and Hedcor Tamugan. There was a notable price differential between Hedcor Consortium’s winning bid price of P4.09 per kWh and the next lowest bid price of approximately P1.01 per kWh. Over the life of the supply contract, the differential will amount to approximately P4.9 bn at current peso value, representing significant savings for Davao Light customers. Davao Light decided to secure the new supply contract in anticipation of the full utilization of the existing contracted energy supply under the ten-year contract with NPC for 1,363,375 MWh and the 12- year contract with Hedcor Consortium. Davao Light’s approach to helping local economies sustain robust growth is by ensuring power reliability. It plows back a significant percentage of its annual earnings to prudent investments that upgrade its distribution network in order to meet the increasing power demand of its franchise area. The precarious power supply situation remains to be a huge concern for Mindanao consumers especially during the first semester of 2014. Davao Light had to implement rotating power interruptions due to generation deficiency within the Mindanao transmission grid. It started with an unscheduled shutdown of the STEAG Coal Plants in Villanueva, Misamis Oriental that brought total darkness to the island. Contingencies designed to respond to energy deficiency, which were tested during the 2010 Mindanao power crisis, were utilized. These included tapping of embedded generators directly connected to the distribution facilities, which are synchronized to the grid. In the event of a power crisis, Davao Light’s Bunker C-fired standby plant, with an initial installed capacity of 63.4 MW, can provide an average of 40 MW on a sustaining basis. Its capacity has since decreased to 58.7 MW as a result of derating. The standby plant is capable of supplying 19% of Davao Light’s electricity requirement. The power supply from Hedcor Sibulan’s 49-MW and Hedcor’s 4-MW Talomo hydroelectric plants in the area likewise augmented the power requirements of Davao Light. The Bunker C-fired plant and the Hedcor Sibulan and Talomo hydroelectric plants are embedded in the Davao Light franchise. Thus, the power generated from these facilities is dispatched directly into the Davao Light distribution network without passing through the NGCP transmission lines. Additional power supply from TMI power barges was also optimized. On March 21, 2011, Davao Light entered into a Power Service Contract (PSC) with TMI for 15 MW, which was approved by the ERC on May 30, 2011. Subsequently, Davao Light signed an additional 15-MW PSC with TMI. Davao Light also implemented the Interruptible Load Program (ILP) especially during the peak demand periods. When advised by the utility, ILP participating companies use their own generator sets so that the smaller residential and commercial customers may utilize available power. To keep pace with the rising demand for power and to support the uptrend of growing economies within its franchise, Davao Light signed a 100-MW PSA with TSI on October 25, 2012.


Cotabato Light and Power Company (Cotabato Light)

Cotabato Light supplies electricity to Cotabato City and portions of the municipalities of Datu Odin Sinsuat and Sultan Kudarat, both in Maguindanao, with a land area of 191 square kilometers. As of December 2014, Cotabato Light’s peak demand was recorded at 23 MW and is serving a total of 36,297 customers. Cotabato Light was formally incorporated in April 1938. Its original 25-year franchise was granted in June 1939 by the Philippine Legislature. In 1961, the Philippine Congress passed RA 3217 which was further amended by RA 3341, extending Cotabato Light’s franchise until June 1989. In August 1989, the Philippine Legislature extended Cotabato Light’s franchise for another 25 years, or until August 2014. Cotabato Light’s franchise was further renewed upon the President’s signing of RA 10637 on June 16, 2014. As of 2014, Cotabato Light has three substations of 10 MVA, 12 MVA and 15 MVA, backed up by another 10 MVA power transformer. It is served by one 69-kV transmission line. Cotabato Light’s distribution voltage is 13.8 kV. These lines can be remotely controlled using the Supervisory Control Data Acquisition (SCADA). Cotabato Light maintains a standby 8.1-MW Bunker C-fired plant capable of supplying approximately 36% of its franchise area requirements. The existence of a standby power plant, capable of supplying electricity in cases of supply problems with PSALM or NGCP and for the stability of voltage whenever necessary, is another benefit to Cotabato Light’s customers. Although a relatively small utility, Cotabato Light’s corporate relationship with its Affiliate, Davao Light, allows the former to immediately implement benefits from the latter’s system developments. Davao Light likewise provides ready technical assistance to Cotabato Light whenever necessary. To sustain a below-cap systems loss, Cotabato Light is continuously innovating its systems and processes. As of December 2014, its systems loss stands at 8.26%, lower than the systems loss cap of 8.5%, as implemented by the ERC. Cotabato Light is part of the second batch (Group B) of private utilities to enter PBR and is currently under the four-year regulatory period starting April 1, 2013. Cotabato Light’s second Regulatory Period ended on March 31, 2013. A reset process should have been initiated 18 months prior to the start of the third regulatory period covering April 1, 2013 to March 31, 2017. The reset process, however, has been delayed due to the issuance of an Issues Paper on the Implementation of PBR for Distribution Utilities under the Rules for Setting Distribution Wheeling Rates (RDWR) by the ERC in 2013. This paper aims to revisit various matters relating to the reset process. The ERC has solicited comments from industry participants and has been holding public consultations on the Issues Paper. Cotabato Light utilizes the most up-to-date systems, such as the Customer Care and Billing (CC&B), Enterprise Resource Planning (ERP) and soon, the Work and Asset Management (WAM). Cotabato Light constantly looks for ways in order to provide its customers with safe and reliable power and operate as a low cost service provider. Its new office building will be operational by the first quarter of 2015. San Fernando Electric Light and Power Co., Inc. (SFELAPCO) Incorporated on May 17, 1927, SFELAPCO was a grantee of a municipal franchise in 1927. In 1961, the Philippine Congress passed RA 3207, which granted SFELAPCO a franchise to distribute electricity for a period of 50 years or until June 2011. Prior to the


expiration of its legislative franchise, or on February 6, 2010, RA 9967 lapsed into law extending the franchise of SFELAPCO for another 25 years from March 24, 2010. SFELAPCO’s franchise in the City of San Fernando, Pampanga covers an area of 78,514 square kilometers with approximately 314.21 circuit-kilometers on its 13.8-kV and 608.21 circuit-kilometers on its 240-volt distribution lines. As of December 2014, SFELAPCO’s peak demand was recorded at 99MW and is serving a total of 91,504 customers. There are 35 barangays in the City of San Fernando that are currently being supplied by SFELAPCO under its existing franchise. SFELAPCO likewise serves barangays San Isidro and Cabalantian in Bacolor, Pampanga. SFELAPCO also serves 25 barangays in the municipality of Floridablanca and two barangays in Guagua, Pampanga. This area consists of 125,000 square kilometers with approximately 89.24 circuit-kilometers of 13.8-kV and 144.69 circuit-kilometers on its 240-volt distribution lines. SFELAPCO is part of the fourth batch (Group D) of private utilities to enter PBR and is currently under the four-year regulatory period starting October 1, 2011. For SFELAPCO’s second regulatory year covering October 1, 2012 to September 30, 2013, it was able to implement the new rate schedule starting April 2013. Consequently, the resulting under-recoveries from the lag starting from October 1, 2012 were included by SFELAPCO as under-recoveries in its rate filing in the third regulatory year. The said application is still pending review by the ERC. AboitizPower has an effective interest of 43.78% in SFELAPCO. Subic EnerZone Corporation (SEZ) In May 2003, the consortium of AEV and Davao Light won the competitive bid to provide distribution management services to SBMA and to operate the SBFZ power distribution system for a period of 25 years. On June 3, 2003, SEZ was incorporated as a joint venture company owned by a consortium comprised of Davao Light, AEV, SFELAPCO, TeamPhilippines, Okeelanta and Pampanga Sugar Development Company (PASUDECO) to undertake the management and operation of the SBFZ power distribution system. On October 25, 2003, SEZ was formally awarded the contract to manage SBFZ’s power distribution system, and it officially took over the operations of the power distribution system on the same day. As of December 2014, SEZ’s peak demand was recorded at 96 MW and is serving a total of 2,946 customers. SEZ’s authority to operate SBFZ’s power distribution system was granted by SBMA pursuant to the terms of The Bases Conversion and Development Act of 1992 (RA 7227), as amended. As a company operating within the SBFZ, SEZ is not required to pay the regular corporate income tax of 30% and instead pays a preferential tax of 5% on its gross income in lieu of all national and local taxes. Following the acquisition by AboitizPower in January 2007 of AEV’s 64.30% effective ownership interest in SEZ, AboitizPower entered into another agreement on June 8, 2007 to acquire the combined 25% equity stake in SEZ of AEV, SFELAPCO, Okeelanta and PASUDECO. On December 17, 2007, AboitizPower bought the 20% equity of TeamPhilippines in SEZ for P92 mn. Together with Davao Light’s 35% equity in SEZ, this acquisition brought AboitizPower’s total equity in SEZ to 100%. SEZ is part of the fourth batch (Group D) of private utilities to enter PBR. On July 6, 2011, ERC released its final determination on SEZ’s application for approval of its Maximum Average Price (MAP), Annual Revenue Requirement (ARR) and Performance Incentive Scheme (PIS) for the period October 2011 to September 2015. The approved


MAP for the first regulatory year, as translated into new rates per customer class, was implemented in January 2012. SEZ has seen a smooth transition in implementing new PBR power rates in 2012. In July 2012, ERC certified SEZ as a Local RES. For SEZ’s second regulatory year covering October 1, 2012 to September 30, 2013, SEZ was able to implement the new rate schedule starting January 2013. Consequently, the resulting under-recoveries from the lag starting from October 1, 2012 were included by SEZ as under-recoveries in its rate filing in the third regulatory year. The approved recalculated MAP and distribution rates for the third regulatory year covering October 2013 to September 2014 was implemented in the May 2014 billing. Mactan Enerzone Corporation (MEZ) MEZ was incorporated in January 2007 when AboitizLand spun off the power distribution system of its MEPZ II project. The MEPZ II project, which was launched in 1995, was operated by AboitizLand under a BOT agreement entered into with the Mactan-Cebu International Airport Authority (MCIAA). On June 8, 2007, AboitizPower entered into an agreement to acquire AboitizLand’s 100% equity stake in MEZ, representing 8,754,443 common shares. Pursuant to the agreement, AboitizPower acquired AboitizLand’s ownership interest in MEZ valued at P609.5 mn, in exchange for AboitizPower’s common shares issued at the IPO price of P5.80 per share. MEZ sources its power from NPC pursuant to a Contract to Supply Electric Energy. Under the said contract, NPC is required to provide power to MEZ up to the amount of contracted load, which is based on the projections provided by MEPZ II locators under their respective PSCs with MEZ. As of December 2014, MEZ’s peak demand was recorded at 22MW and is serving a total of 82 customers. Balamban Enerzone Corporation (BEZ) BEZ was incorporated in January 2007 when Cebu Industrial Park Developers, Inc. (CIPDI), a joint venture between Aboitiz Land, Inc. (AboitizLand) and Tsuneishi Holdings (Cebu), Inc. (THC), spun off the power distribution system of the WCIP-SEZ. WCIP-SEZ is a special economic zone for light and heavy industries owned and operated by CIPDI. CIPDI, located in Balamban, Cebu, is home to the shipbuilding and ship repair facilities of THC, as well as to the modular fabrication facility of Metaphil International, Inc. and recently, to Austal Philippines Pty. Limited. On May 4, 2007, CIPDI declared property dividends to its stockholders in the form of equity in BEZ. On June 8, 2007, AboitizPower entered into an agreement to acquire AboitizLand’s 60% equity stake in BEZ, represented by 4,301,766 common shares of BEZ. Pursuant to the agreement, AboitizPower acquired AboitizLand’s ownership interest in BEZ valued at P266.9 mn, in exchange for AboitizPower’s common shares issued at the IPO price of P5.80 per share. On March 7, 2008, AboitizPower purchased THC’s 40% equity in BEZ. The acquisition brought AboitizPower’s total equity in BEZ to 100%. In January 2011, BEZ secured firm contracts from various power suppliers such as Green Core Geothermal Incorporated (GCGI), Cebu Energy and EAUC to ensure sufficient power supply to the different industries within the WCIP-SEZ. In the same period, BEZ


became a direct member of the PEMC to avail of the power available at the WESM. As of December 2014, BEZ’s peak demand was recorded at 28 MW and is serving a total of 34 customers.

Lima Enerzone Corporation (Lima Enerzone) Lima Enerzone was incorporated as Lima Utilities Corporation on June 5, 1997 to serve and provide locators within the LTC with a reliable and stable power supply. It is a wholly-owned subsidiary of Lima Land. With the acquisition by AboitizLand of the interests of the Alsons and Marubeni groups in Lima Land in 2013 and 2014, respectively, the company became a wholly-owned subsidiary of AboitizLand. Subsequently, in mid 2014, AboitizLand divested its interests in Lima Utilities Corporation through the sale of its shares to AboitizPower. The acquisition was completed on July 7, 2014. Following the change of ownership of the company, the new shareholder of the company, AboitizPower, then sought approval to change its corporate name to Lima Enerzone, which was approved by the SEC on October 14, 2014. Lima Enerzone manages a 50-MVA substation with dual power supply system connected through a 69-kV transmission line of NPC. The Lima Enerzone substation is directly connected to the grid in Batangas City, with an alternate connection to the MakBan geothermal line. Lima Enerzone’s responsive interface ensures that customers receive power that fully meets their business requirements. As asset manager of the electrical infrastructure constructed at the Lima Technology Center (LTC), Lima Enerzone has the sole responsibility of providing clean, reliable and uninterrupted power supply to enable the multinational manufacturing companies to produce quality products at international standards. As such, Lima Enerzone has an on-going project of an additional 50 MVA power transformer to serve the increasing demand for future locators and expansions. This project will also provide power supply reliability and flexibility at the LTC. As of December 2014, Lima Enerzone’s peak demand was recorded at 22 MW and is currently serving a total of 90 customers. RETAIL ELECTRICITY AND OTHER RELATED SERVICES One of the objectives of electricity reform in the Philippines is to ensure the competitive supply of electricity at the retail level. With the start of Commercial Operations of Retail Competition and Open Access (Open Access), large-scale customers will be allowed to obtain electricity from RES licensed by the ERC. Aboitiz Energy Solutions, Inc. (AESI) On November 9, 2009, AESI, a wholly-owned Subsidiary of AboitizPower, was granted a license to act as a RES, which license was renewed on October 29, 2012 for another five years. With the start of Commercial Operations of Open Access in June 26, 2013, AESI is initially serving 42 customers with a total average consumption of 107,942 MWh per month. This customer base provided a stable off-take market for the steady expansion of AESI market share in the Contestable Market leading to its delivery of 1,197,380 MWh for the year 2014. In December 2014, PSALM formally turned-over the management and dispatch for the 40MW strips of energy from the ULGPP which AESI won in the November 2013 IPPA bid. With the implementation of the January 2015 billing cycle, AESI is expected to formally issue its first power bill to its sole distribution utility off-taker for the 40MW strips contracted under a PSA


Prism Energy, Inc. (Prism Energy) Prism Energy was incorporated in March 2009 as a joint venture between AboitizPower and Vivant. It was granted a five-year RES license by the ERC on May 22, 2012 until May 22, 2017. Prism Energy is envisioned to serve contestable customers in the Visayas Region. As a retail electricity supplier, Prism Energy will provide its customers with contract options for electricity supply to be based on their operating requirements. As the power supply situation in the Visayas is being stabilized, Prism Energy is projected to begin formal operations upon procurement of generation supply contracts from generation companies that will operate in the region. It will provide retail electricity supply to end-users qualified by the ERC to contract for retail supply. Adventenergy, Inc. (AdventEnergy) Incorporated in August 2008, AdventEnergy is a licensed RES, duly authorized by the ERC to sell, broker, market, or aggregate electricity to end-users including those within economic zones. AdventEnergy’s RES license was renewed by the ERC on June 18, 2012 and is valid until June 18, 2017. The company was specifically formed to serve contestable customers who are located in economic zones. AdventEnergy differentiates itself from competition by sourcing electricity from a 100% renewable source. With this competitive advantage, more and more companies are opting to source a part, if not the majority, of their electricity supply from AdventEnergy as an environmental initiative. At present, AdventEnergy has Retail Supply Contracts with ten customers operating inside a PEZA zone. A total of 17 customers is currently under contract with AdventEnergy which has supplied a total of 306,440 MWh for the year 2014. SN Aboitiz Power - RES, Inc. (SN Aboitiz Power - RES) SN Aboitiz Power-RES, Inc. (SN Aboitiz Power - RES) is the retail electricity supplier arm of the SN Aboitiz Power Group, the group of companies formed out of the strategic partnership between the AboitizPower and SN Power. SN Aboitiz Power - RES caters to contestable customer sector and electricity consumers using an average of at least 1 MW in the last 12 months across all industries under Open Access. It offers energy supply packages tailored to the customers’ needs and preferences. Its vision is to become the leading RES in the country through profitable growth, excellence in business processes, and innovative ideas. It also aims to supply the energy requirements of its customers in a fair and equitable manner and to contribute to the vibrant local power market that supports the country’s development. SN Aboitiz Power-RES harnesses the synergy from the partnership of SN Power Group, an international hydropower expert, and AboitizPower Group, a local power industry leader. As of December 31, 2014, SN Aboitiz Power-RES contributed to 12% to the SN Aboitiz Power Group’s bilateral contract volume or 11% to its sales revenue. In view of the restructuring of the SN Power Group in 2014, 40% of the outstanding capital stock of SN Aboitiz Power – RES was transferred by SN Power Singapore to its affiliate, SN Power Netherlands.


FINANCIAL SERVICES AEV’s financial services group is composed of Union Bank of the Philippines, a leading universal bank in the country, and UnionBank’s Subsidiary, City Savings Bank, Inc., a thrift bank based in Cebu City. Union Bank of the Philippines (UnionBank) and City Savings Bank, Inc. (CitySavings) UnionBank is a publicly-listed universal bank. It distinguishes itself through superior technology, unique branch sales and service culture, and centralized backroom operations. UnionBank’s superior technology allows delivery of online, real time business solutions to meet the customers’ changing and diverse needs through innovative and customized cash management products and service offerings. Its unique branch culture ensures efficient and quality service as well as mitigates operational risk. The bank’s centralized operations enable it to provide responsive, scalable, and secure transaction processing. Aligned with its thrust of being at the forefront of technology-based banking in the Philippines, UnionBank endeavors to elevate its systems and processes to be at par with international standards and best practices. It obtained ISO 9001:2000 Quality Management System (QMS) Certification for its Central Processing Services in 2008, making it then the first and only bank awarded for its entire centralized backroom operations. In 2010, UnionBank received ISO 9001:2008 certification, an upgrade from its previous certification. Thereafter, UnionBank was certified for ISO 27001:2005 Information Security Management System, attesting to the bank’s unwavering commitment to become an acknowledged leader and benchmark for service quality, technological advancement, and operational excellence. UnionBank also achieved ISO 9001:2008 certifications for its Customer Service Group in 2012 and Branch Operations Management in 2013. It has consistently been certified as having zero non-conformance every year from date of certification during quality audits, demonstrating UnionBank’s dedication to uphold quality in its business processes. In addition, UnionBank successfully obtained ISO 22301:2012 Business Continuity Management System Certification in 2014, underscoring its preparedness in responding to business disruptions. UnionBank’s clientele encompasses retail, middle-market and corporate customers, as well as major government institutions. UnionBank believes that its use of technology, and marketing and operational structure has enabled it to capture and secure a loyal customer base, and to achieve high levels of efficiency and productivity. UnionBank, originally known as “Union Savings and Mortgage Bank”, was incorporated in the Philippines on August 16, 1968. The Bank’s common shares were listed in the PSE on June 29, 1992. It was granted the license to operate as a universal bank on July 15, 1992. UnionBank became the thirteenth and youngest universal bank in the country in only its tenth year of operation as a commercial bank. UnionBank’s major shareholder groups include AEV, Social Security System, the country’s provider of social security to workers in the private sector, and Insular Life Assurance Co., Ltd., one of the leading and largest Filipino-owned life insurance companies in the Philippines. UnionBank has undertaken two bank mergers, first with International Corporate Bank (“Interbank”) in 1993 and then with International Exchange Bank (“iBank”) in 2006, catapulting it to being one of the ten largest universal banks in the Philippines based on asset size.


On April 26, 2007, UnionBank embarked on a primary offering of 90 mn new common shares in order to strengthen its capital adequacy ratio in anticipation of Basel II requirements, thereby enhancing its financial flexibility. The offering expanded the shareholder base by 16.3% and raised additional equity worth over P5.1 bn. The new shares were listed in the PSE on May 10, 2007. On October 14, 2009, UnionBank issued P3.75 bn worth of unsecured subordinated debt, eligible as Lower Tier 2 capital, with an interest rate of 7.375% per annum. It exercised the call option feature of the debt instrument on January 14, 2014 after obtaining the Bangko Sentral ng Pilipinas (BSP)’s approval on November 22, 2013. On January 8, 2013, UnionBank’s Board of Directors approved the purchase of CitySavings, a premier thrift bank specializing in granting teacher’s loans under the Department of Education (DepEd)’s Automatic Payroll Deduction System (APDS). The purchase price of P5.734 bn was based on 2.5 times the audited book value of CitySavings’ shares as of December 31, 2012. The transaction was approved by the Monetary Board of the BSP on March 21, 2013. The acquisition of CitySavings is aligned with UnionBank’s business plans and long-term strategy of building businesses based on consumers. On October 20, 2013, UnionBank raised a total of P3.0 bn in its initial offering of Long-Term Negotiable Certificates of Deposits (LTNCDs). The LTNCDs carry a coupon rate of 3.50% per annum, which is payable quarterly beginning January 18, 2014 maturing on April 17, 2019. Proceeds of the issuance were utilized to improve the bank’s deposit maturity profile and support business expansion plans. On October 16, 2014, an amendment to UnionBank’s Articles of Incorporation was approved by the BSP, whereby the authorized capital stock increased from P6.7 bn to P23.1 bn, divided into approximately 1.3 bn common shares at par value of P10.00 and 100 mn preferred shares at par value of P100.00. UnionBank likewise obtained BSP approval for the payment of 65% stock dividends, which would be used to fund the 25% subscription relating to the increase in capital stock. Record date and payment dates for the aforesaid dividend declaration were set for November 18 and December 4, 2014, respectively. On November 20, 2014, UnionBank issued P7.2 bn of Basel III-compliant Tier 2 Unsecured Subordinated Notes with a coupon rate of 5.375% per annum due February 20, 2025, callable on February 20, 2020.

FOOD MANUFACTURING Pilmico Foods Corporation (Pilmico) Pilmico, the food arm of the Aboitiz Group, is one of the largest flour manufacturers in the country, and is ranked among the top three domestic flour producers in terms of sales. Incorporated on August 8, 1958, Pilmico began as a joint venture of the Aboitiz Group, the Lu Do Group, the Soriano Group and the Pillsbury Group of the United States. The Lu Do, Soriano and Pillsbury Groups eventually sold all their shareholdings to AEV. Pilmico is primarily engaged in the manufacture and sale of flour, feeds, and their by-products. It has a wide network of distributors and dealers located in major cities of Manila, Cebu, Davao, Iloilo, Bacolod and Cagayan.


Pilmico’s raw materials are imported from the USA, Canada and Australia. This exposes Pilmico to the risk of loss arising from currency fluctuations and movements in the prices of raw materials. The high costs of freight and distribution limit the selling territory of Pilmico to within its perimeter. Pilmico responds to this through the strategic location of its Iligan plant, which narrows down the high freight and distribution costs. In September 2008, Pilmico commenced commercial operation of its new 115,000 metric tons (MT) Feedmill 1 located within its flour mill complex in Iligan City. By October 2010, Pilmico completed the construction of its Iligan Feedmill 2, doubling its capacity to produce high quality animal feeds. This allowed Pilmico to meet the growing demand for animal feeds in the Visayas and Mindanao regions, and to achieve operating cost efficiencies and yield improvements. Pilmico expanded its port facilities in Iligan, as well as its unloading and storage capabilities in September 2012. The port expansion was designed to accommodate Panamax vessels, which have a maximum capacity of 65,000 MT. With the new pneumatic unloader, the port can easily unload 10,000 MT daily. In September 2014, Pilmico has broken ground on the construction of its Iligan Feedmill 3 to once again answer the growing demand of feeds in the Visayas and Mindanao regions. This is an additional 124,800 MT in feedmill capacity and is expected to start commercial operation by October 2015. To cater to the additional raw material requirements and feeds volume caused by the expansion of Feedmill 3, Pilmico has started the construction of the Inter-Island Pier 2 in December 2014. This will resolve the bottle neck in the delivery of raw materials to Iligan and the disbursement of feeds to the other parts of Visayas and Mindanao. The Inter-Island Pier 2 is expected to be operational by July 2015. Anchoring on Pilmico’s core strength as flour miller, Pilmico is exploring the opportunity to grow the flour business internationally. In June 2014, Pilmico established its first Southeast Asian representative office in Jakarta Selatan, Indonesia. This move will allow Pilmico to build its market in Indonesia whose flour per capita consumption is higher at 20 kilograms (kgs) per capita versus the Philippines’ 18 kgs per capita consumption. This is only the first step for Pilmico, as it deepens its reach in the Indonesian market and builds its competitiveness in the flour milling industry. Further efforts will be made by Pilmico to strengthen its presence in the ASEAN region. Pilmico Animal Nutrition Corporation (PANC) In June 1997, Pilmico entered the swine production and animal feeds business, through PANC (formerly: Fil-Am Foods, Inc.). PANC was a joint venture with Tyson International Holding Co. (Tyson), a subsidiary of Tyson Foods, and PM Nutrition Company, Inc. (PMNC), an affiliate of Purina Mills, Inc. In October 2002, Pilmico acquired the shareholdings of Tyson and PMNC in PANC, thus making PANC a wholly-owned Subsidiary of Pilmico. At present, Pilmico, together with its wholly-owned Subsidiary Filagri Holdings, Inc., owns PANC. In January 1999, PANC began commercial operations of its feedmill plant located in Capas, Tarlac to cater to the growing demand of feeds in Luzon. In the second half of the same year, PANC started its swine operations with a sow level of 4,750. In November 2008, PANC constructed a biogas system which converts hogs’ waste to biogas, making the farms partially self-sufficient for its electricity requirement. 2009 saw the first farm expansion of PANC, which brought the company’s sow level to 6,500. By 2012 the farms’ capacity was once again ramped up to reach 8,360 sow level and is set


to be completed by early 2015. This increased average monthly hog sales volume to 13,000 heads. To continually grow the farms business, PANC is looking at increasing its sow level to 14,000 by 2017. This is more than twice as much the size of its farms business from its first expansion of 6,500 sow level in 2012. At this level, its monthly sales volume would reach 22,000 heads, a 70% increase from 2014 level. This would make PANC one of the biggest producers of market hogs in the country. This year, PANC is going to start layer farms operations. The facility in Tarlac can hold up to 160,000 egg-laying chickens that would translate to 4.16 mn eggs per month. Filagri, Inc. (Filagri)

As part of the diversification plans of PANC, Filagri, Inc. (formerly Filagri Land, Inc.) became the project vehicle of PANC’s low-cost feeds starting 2012, following the approval of the amendment of the purpose clause of Filagri’s Articles of Incorporation and change of its corporate name on January 26, 2012. Filagri was originally formed to hold PANC’s investments in real estate properties. Filagri is a wholly-owned Subsidiary of Pilmico. Pilmico International Pte. Ltd. (Pilmico International)

Pilmico International is the project vehicle of AEV’s first international investment in the feed business. The company was established in June of 2014 as a wholly-owned Subsidiary of AEV through AEV International Pte. Ltd. (AEV International). Pilmico International has 70% equity interest in Pilmico VHF Joint Stock Company, the operator of an aqua feedmill in Dong Thap Province in Vietnam. Pilmico VHF Joint Stock Company (Pilmico VHF)

In August 2014, Pilmico International successfully acquired a 70% equity stake in feedmill operator Vinh Hoan 1 Feed JSC (VHF) from its parent company, Vinh-Hoan Corporation (VHC). Pilmico International is set to purchase the remaining shares within five years at a pre-agreed price. The Food Group’s entry in Vietnam marks the first international investment of the Aboitiz Group. VHF was officially renamed as Pilmico VHF Joint Stock Company at the end of 2014. Pilmico VHF is located in Dong Thap Province in Vietnam, and is 165 kilometers (km) away from Ho Chi Minh City. It is the fourth largest pangasius aqua feeds producer in Vietnam, with a capacity of 165,000 MT. An expansion project is on-going to increase capacity to 270,000 MT by fourth quarter of 2015. This will support the aqua feeds requirement of the growing fish processing business of VHC via a long-term supply agreement. VHC will continue to export pangasius to U.S.A. and Europe with a 50,000 MT capacity. The investment in Pilmico VHF allowed the Food Group to gain a foothold in the Vietnamese aqua feeds business, and at the same time, build its reach to other aqua farm customers. Also, this strategic move is a gateway to investments toother ASEAN countries like Thailand, Laos and Cambodia. This allows Pilmico VHF to expand its core feeds business internationally, and to diversify and gain competence in the aqua feeds product segment currently not offered in the Philippines. In 2014, Pilmico and its Subsidiaries contributed P1.3 bn in earnings (unaudited) to the net income of the Group (+5% YoY).


REAL ESTATE Cebu Praedia Development Corporation (CPDC) Incorporated on October 13, 1997, CPDC is engaged in leasing of properties located in the cities of Makati and Cebu. To date, its major property holdings include the commercial and office building block located at 110 Legazpi Street, Legaspi Village, Makati City and AEV’s Cebu offices located at Gov. Manuel A. Cuenco Avenue, Kasambagan, Cebu City. Aboitiz Land, Inc. (AboitizLand) AboitizLand, the real estate arm of the Aboitiz Group, was incorporated on June 2, 1964 under the name Central Visayan Warehousing Co., Inc. It is engaged in the design and development of distinct communities for residential, industrial and commercial use, with an ISO 9001:2008 certificate for QMS. After two decades in operation, AboitizLand remains one of the country’s most trusted real estate developers. AboitizLand has investments in residential, commercial, and industrial developments. It also engages in property management in Cebu. It currently has five residential projects in selling phase across the different product types - Lot Only, House and Lot, and Condominiums. It is the developer and operator of three economic zones, the Mactan Economic Zone II (MEZ II) in Barangay Basak, Mactan, Lapu Lapu City; the WCIP in Balamban, Cebu, through its subsidiary, CIPDI; and LTC in Malvar, Batangas. It also has four commercial projects, namely, The Persimmon Plus in Mabolo, Cebu City; and the iMez Building, Pueblo Verde, and The Outlets at Pueblo Verde, all of which are located in Barangay Basak, Mactan, Lapu Lapu City. Throughout its long history, AboitizLand continuously innovates to meet the discriminating needs of diverse markets. It calls its customers vecinos, the Basque word for neighbor, as it strongly believes that investing in a home could be the single biggest decision in the life of a Filipino. It commits to provide each vecino with the ultimate real estate experience. AboitizLand’s brand idea is Nurturing Communities, and its tagline is “Made for Life”. Both are supported by three attributes that define AboitizLand’s culture and business thrusts: nurturing, assuring and enduring. In 2013, AboitizLand acquired 60% majority stake in Lima Land. Lima Land is the owner and operator of LTC, a 570-hectare PEZA-registered industrial park located in Batangas. In February 2014, AboitizLand completed the acquisition of Lima Land through the purchase of the remaining 40% ownership interest. AboitizLand believes that it must enter the national scene in order to achieve significant growth, while strengthening its Cebu organization to intensify market position. Reinventing the organization and its products are essential steps for the company to reach its growth targets. Cebu Industrial Park Developers, Inc. (CIPDI) CIPDI is a joint venture company between AboitizLand (60%) and the Kambara Group of Japan (40%). It started operations in 1993, with the development and operation of WCIP in Balamban, Cebu. WCIP is a 280-hectare industrial zone, catering to medium to heavy industries such as shipbuilding, ship recycling facilities, iron and steel


manufacturing plants and allied activities. WCIP currently has ten locators and employs approximately 16,500 employees. Propriedad del Norte, Inc. (PDNI) Incorporated on March 1, 2007, PDNI is a wholly-owned Subsidiary of AboitizLand. It is engaged in the purchase and development of real estate. PDNI’s current land bank stands at 54 hectares, all of which are located in Liloan, Cebu.

Lima Land, Inc. (Lima Land)

Lima Land was incorporated on October 12, 1995 by the Alsons group and Marubeni group to develop and operate the LTC, a 570-hectare economic zone in Malvar, Batangas. LTC is primarily offered to export oriented companies engaged in manufacturing and warehousing operations. LTC is located between Lipa and Malvar, Batangas, 65 kilometers away from the Makati Central Business District. It is envisioned to be a total township project, combining the concepts of an integrated city and an environment for wholesome living. In October 2013, AboitizLand acquired Alsons’ 60% interest in Lima Land. The remaining 40% interest of Marubeni was subsequently acquired in February 2014, thereby making Lima Land a wholly-owned Subsidiary of AboitizLand. Lima Water Corporation (LWC) LWC is a wholly-owned subsidiary of Lima Land. It operates the water distribution within LTC, with a daily water capacity of 8,700 cubic meters and full capacity of 40,000 cubic meters. It draws water from its own deep well sources and reservoirs. LWC provides industrial and potable water, ensuring its availability and sufficiency throughout LTC. LWC also operates its own centralized wastewater treatment plant. It ensures proper treatment of industrial and domestic waste generated within LTC. It utilizes an oxidation type system that can process up to 22,000 cubic meters of wastewater per day. LWC has its own wastewater-testing laboratory to properly monitor the waste discharge of the economic zone. Rehabilitation works for LWC’s wastewater treatment plant shall be done this year, as well as the construction of additional deep well and ground water reservoir at the expansion areas. These infrastructure developments are done to meet the existing locators’ requirements, and in anticipation of the new locators’ industrial and potable water needs. In its first year of operations after the acquisition by AboitizLand, revenue from water distribution rose by 15% from P54 mn in 2013, to P62 mn by the end of 2014. Higher growth is expected in the year 2015, as new locators start operations. Cebu District Property Enterprise Inc. (CPDEI) Consistent with its vision for growth, AboitizLand partnered with Ayala Land, Inc. (Ayala Land) to undertake real estate projects in Cebu through CPDEI. CPDEI is a joint venture company, with each of Ayala Land and AboitizLand having 50% equity. This partnership incorporates the strengths of both companies, as it brings together AboitizLand’s deeply-rooted real estate experience in Cebu and Ayala Land’s track record in developing master-planned and sustainable communities.


For its first project, CPDEI looks to transform a 15-hectare lot in Mandaue City into a mixed-use district. Targeted to be launched sometime in 2015, this development is envisioned as an impressive growth center, which will have innovative residential developments and commercial spaces with retail and office components. OTHER INVESTMENTS

AEV’s other investments include holdings in: [i] aviation through AEV Aviation, Inc., [ii] production of liquid bio-methane fuel through Aseagas Corporation, and [iii] underwriting of insurable risks of AEV through Archipelago Insurance Pte. Ltd. On February 12, 2014, AEV has completed the divestment of its interests in the shipping and shipping related businesses with the disposition of all its interests in Aboitiz Jebsen Company, Inc., Aboitiz Jebsen Manpower Solutions, Inc., and Jebsen Maritime, Inc. (collectively, the “Abojeb Group”). The divestment of interest in the Abojeb Group is part of AEV’s strategy to focus on its identified core businesses such as power generation and distribution, financial services, food, real estate and infrastructure. Jebsen Invest AS, AEV’s long-time partner in the Abojeb Group, will continue to partner with the Aboitiz family members in their personal capacity. Archipelago Insurance Pte. Ltd. (Archipelago Insurance)

Archipelago Insurance, a wholly-owned subsidiary of AEV, was incorporated in Singapore on February 26, 2010 as a general captive insurance company. It is licensed and regulated by the Monetary Authority of Singapore under the Insurance Act, Cap. 142. As a captive insurer licensed to insure only the risks of its parent and related companies, Archipelago Insurance underwrites the insurable risks of AEV and its Subsidiaries. The classes of risks covered by the company include Property All Risk, Sabotage and Terrorism, Delay in Start-Up and Marine Hull insurance of the Aboitiz Group. AEV International Pte. Ltd. (AEV International) AEV International was established on May 5, 2014 as a holding company of AEV’s investments abroad. AEV International owns 100% of Pilmico International, the investment company that holds the 70% equity interest in Pilmico VHF. AEV Aviation, Inc. (AEV Av)

AEV Av holds AEV’s aviation assets, including the corporate aircraft and accompanying support facilities. Incorporated on October 9, 1990 as Spin Realty Corporation, AEV Av was reorganized in late 1998 when the AEV corporate aircraft was placed under its holdings. In September 18, 2013, the SEC approved the increase in the authorized capital stock of AEV Av to P502 mn, which allowed AboitizPower to infuse capital in the company. In 2013, AboitizPower acquired equity interest in AEV through the subscription from AEV Av’s increase in authorized capital stock. AEV and AboitizPower remain as the majority stockholders of the company. To date, AEV Av has 15 employees, who are tasked to serve the aviation needs of the executives of AEV and its Subsidiaries and Affiliates all over the Philippines. AEV Av operates under the strictest safety measures and complies with all government aviation


policies and the aircraft manufacturers’ mandated maintenance procedures. All of AEV Av’s pilots and maintenance personnel undergo rigid trainings. This ensures that AEV Av’s employees are armed with the latest knowledge and skills in aviation technology. Aseagas Corporation (AseaGas) In June 2012, AEV partnered with British company GazAsia to develop, construct and operate renewable fuel production plants that produce liquid bio-methane fuel from organic wastes. AseaGas, the company that will undertake this project, will employ existing and proven technology to produce and liquefy methane gas for transportation purposes. By providing waste-to-fuel solutions through the production of liquid bio-methane fuel, the company aims for the improvement of air quality in cities by providing sustainable and green transport solutions. To ensure availability of raw material, AseaGas entered into an agreement with Absolut Distillers, Inc. (Absolut), a subsidiary of La Tondeña Distillers Incorporated for the supply of organic effluent wastewater. On March 26, 2014, AseaGas broke ground on the first bio-methane fuel plant in the country, with a capacity of approximately 8,000 MT per year of liquid bio-methane. Its products will be sold to commercial vehicle fleets and public transport running on gas engines. The company is also set to apply for registration as a renewable energy developer with the DOE, allowing it to avail of the incentives under the RE Law.

(ii) Sales

Comparative amounts of consolidated revenues and profitability of continuing operations, and assets are as follows:

2014 20131 20122 Gross Income 109,867 90,876 81,018

Operating Income 24,546 21,223 22,945

Total Assets 280,997 247,088 222,463 Note: Values in the above table are in Million Pesos.

The operations of AEV and its subsidiaries are based largely in the Philippines.

1 Figures have been restated to reflect adjustments from the retro-active adoption of revised Philippine Accounting Standards, 19

(Employee Benefits) 2 Ibid.


Comparative amounts of revenue contribution by business grouping are as follows:

2014 20133 20124 Power Distribution & Generation 86,759 78% 72,055 79% 62,153 76%

Food Manufacturing 18,365 17% 16,432 18% 15,688 19%

Financial Services 0 0% 0 0% 2,202 3%

Real Estate 3,268 3% 1,761 0 0%

Parent & Portfolio 2,702 2% 1,272 1% 1,611 2%

Total Revenues 111,094 100% 91,520 98% 81,654 100%

Less: Elimination 1,226 643 636

Net Revenues 109,867 90,876 81,018 Note: Values in the above table are in Million Pesos. Percentages refer to the business group’s share in the total net revenue for a given year. Under financial services group, only CSB’s revenues are reflected in 2012 when CSB was still treated as Subsidiary. Starting 2013, CSB’s revenue is no longer indicated in the financial services line as it is now treated as an associate, resulting from the sale by AEV and Pilmico of their investment in CSB to its banking associate, UBP, in the first quarter of 2013. The revenues of associates do not form part of the Group’s consolidated revenues. UBP’s 2014, 2013, and 2012 contributions to registrant’s net income are reported under the account “Share in Net Earnings of Associates”. For additional details on the income contributions of all business segments/groups to AEV, please refer to Business Segment Information of the Notes to the Consolidated Financial Statements.

(iii) Distribution Methods of the Products or Services

POWER GENERATION AND DISTRIBUTION

The Generation Companies sell their electricity either through the WESM or through bilateral PSAs with the NPC, private distribution utilities, electric cooperatives, retail electricity suppliers or other large end-users. Currently, each of SN Aboitiz Power-Magat and SN Aboitiz Power-Benguet have ASPAs with the NGCP as AS providers to the Luzon grid. As part of its contract, SN Aboitiz Power-Benguet, through its Binga plant, offers its available off-peak capacity for AS to the NGCP (System Operator). This is confirmed by a notice provided by NGCP to SN Aboitiz Power- Benguet containing the AS schedule. In March 2013, SN Aboitiz Power-Magat signed an ASPA with NGCP covering firm contracted capacities for both regulating and contingency reserves at 155 MW. Another Affiliate, TLI, also signed an ASPA with the NGCP on March 14, 2013 for both firm and non-firm contracted capacities for contingency reserve at 60MW during off-peak and 60 MW during peak hours. TLI’s ASPA with NGCP is valid for a period of five years from the date of approval by ERC. Majority of AboitizPower’s Generation Companies have transmission service agreements with NGCP for transmission of electricity to the designated delivery points of their customers, while others built their own transmission lines to directly connect to their customers. In some instances, where the off-taker is NPC, NPC takes electricity from the generation facility itself.

3 Ibid. 4 Ibid.


On the other hand, AboitizPower’s Distribution Utilities have exclusive distribution franchises in the areas where they operate. Each of the Distribution Companies has a distribution network consisting of a widespread network of predominantly overhead lines and substations. Customers are classified in different voltage levels based on their electricity consumption and demand. Large industrial and commercial consumers receive electricity at distribution voltages of 13.8 kV, 23 kV and 69 kV while smaller industrial, commercial and residential customers receive electricity at 240 V or 480 V.

All of AboitizPower’s Distribution Utilities have entered into transmission service contracts with the NGCP for the use of the NGCP’s transmission facilities to receive power from their respective IPP, and NPC/PSALM for distribution to their respective customers. VECO owns a 138-kV tie-line that connects to Cebu Energy’s power plant. All customers that connect to the Distribution Utilities’ distribution lines are required to pay a tariff approved by the ERC. AboitizPower’s wholly-owned RES companies, AdventEnergy and AESI, have existing electricity supply contracts with their respective customers. In 2013, AdventEnergy supplied to five companies under the NET Group, a developer of office towers in Bonifacio Global City, and delivered a total of 24.9 mn kWhs. As of March 31, 2014, AdventEnergy supplied renewable energy to 11 companies with a total power demand of 32.3 MW. To ensure continuous supply of power to its customers, AdventEnergy has existing power supply contracts with renewable power generation companies. AESI has a total of 45 customers under Retail Electricity Supply Contracts with terms ranging from three to ten years. In 2013, AESI delivered a total of 640.8 mn kWhs to its customers. As of March 31, 2014, AESI registered a total power demand of 150 MW. AESI entered into contracts with various power generation companies to ensure reliable and continuous supply of power to its customers. The above RES companies follow a pricing strategy which allows customer flexibility. The power rates are calculated using a fixed formula pricing arrangement based on customer load curves, resulting in either a peak-off-peak or capacity load-based competitive rate.

FINANCIAL SERVICES

UnionBank provides its relevant target customers’ information and transaction needs through strategically located branch networks and automated teller machines (ATMs), supplemented by a call center under its ISO-certified Customer Service Group. To complement its brick and mortar presence and strengthen its digital footprint, UnionBank has a website: www.unionbankph.com. Branch Network. UnionBank and its Subsidiaries ended 2014 with 253 branches nationwide. Select branches were relocated to strategic areas situated within and outside of Metro Manila to maximize visibility and expand customer reach. The branches have user-friendly terminals and a Web-based Signature Verification System (SVS), which promotes efficient processing of teller transactions. Customers can do over-the-counter (OTC) withdrawals and check encashment at any UnionBank’ branch. UnionBank’s Check Verification System utilizes Philippine Clearing House Corporation’s check images, and is instrumental in enabling fast and reliable check clearing.


ATM Network. UnionBank and its Subsidiaries’ network of 282 ATMs, as of year-end 2014, supplements its branch network in providing banking services to its customers anytime, anywhere. With UnionBank’s interconnection with the Megalink ATM consortium, UnionBank’s cardholders have access to over 15,000 ATMs nationwide. In addition, UnionBank’s ATM card functions as a VISA debit card that allows electronic purchase and payment transactions. Call Center. Retail customer relationship and care is handled by UnionBank’s 24-hour call center, catering to deposit and card product queries, among others. The call center utilizes a mix of phone, postal mail, email, fax and internet as customer touch points. In handling customer complaints, it adheres to certain Service Level Agreements such as feedback or resolution of ATM-related concerns and redelivery of card within Metro Manila in as early as one day. Customer complaint handling is continuously improved through resolution tracking. E-Banking. UnionBank’s financial services portal, www.unionbankph.com, is the first in the Philippines that provides a wide range of financial services to its individual, business, corporate, and investor customers. These services include online corporate cash management, bills payment, fund transfer, loan application, transaction information, basic request and information services, insurance, and wireless access.

FOOD MANUFACTURING Pilmico products are distributed nationwide through external distributors and dealers located in major cities like Manila, Cebu, Davao, Iloilo, Bacolod, Iligan and Cagayan. Pilmico VHF’s products are distributed in the Mekong Delta region in South Vietnam, serving requirements of Vinh Hoan Corporation as well as external aqua farmers.

REAL ESTATE

As of 2014, the residential business unit comprised of 44% of total revenues of AboitizLand. Since the early 1990s, AboitizLand has been developing upper-mid to high-end residential subdivisions, focusing on horizontal (lot-only and/ or house-and-lot) products. The real estate industry has drastically grown over the past five years, moving particularly towards condominium products. In 2008, AboitizLand was ready to enter a new sphere – vertical product types – by launching its first mixed-use condominium project, The Persimmon. AboitizLand is instrumental in introducing many firsts to Cebu real estate – the New Urbanism concept of live-work-play in a large master-planned community in Pristina North; Zen living, which takes off from the spa lifestyle trend, in Kishanta; the commercial and residential ‘urban village’ that is The Persimmon; the introduction of shop houses as a residential product in Ajoya; fully-furnished affordable units in an all-studio residential tower which is The Persimmon Studios, and most recently, Asian Contemporary design units in Almiya. Despite stiff local competition and the aggressive entry of national real estate developers to Cebu, AboitizLand has remained a stable performer. 2014 was another record year for AboitizLand, where it posted residential sales of P1.3 bn, 31% higher than the previous year. Meanwhile, AboitizLand’s industrial business unit was the largest contributor to revenue in 2014, comprising 57% of the total.


AboitizLand is a registered developer/operator of MEZ II, where it leases land and provides utility services to locators inside the economic zone under a BOT Agreement with MCIAA. The 63-hectare zone is home to 38 light-to-medium manufacturing locators and is fully leased out. The commercial division currently focuses on neighborhood offices and lifestyle and retail hubs that complement existing industrial or residential developments. Anticipating growth in the Business Process Outsourcing (BPO) sectors, AboitizLand launched its first BPO office building, iMEZ, thereby expanding its product line. In 2013, AboitizLand successfully launched its first outlet development in Visayas and Mindanao, The Outlets at Pueblo Verde, which offers merchandise of global brands at 20%-75% discounts year-round. This is the latest segment to the company’s commercial product portfolio. AboitizLand offers property management services to support its residential, industrial and commercial products, as well as those of the other companies within the Aboitiz Group. These services cover community security, site and infrastructure maintenance, village activities and policy administration.

(iv) New Products/Services

POWER

Other than the ongoing Greenfield capital and/or rehabilitation projects undertaken by AboitizPower’s Generation Companies, AboitizPower and its Subsidiaries do not have any publicly announced new product or service to date. FINANCIAL SERVICES UnionBank offers a broad range of products and services, which include deposit and related services, corporate and middle market lending, consumer finance loans such as mortgage, auto loans and credit card; investment, treasury and capital market, trust and fund management, remittance, cash management and electronic banking, as well as pre-need insurance through its subsidiary, First Union Plan, Inc. UnionBank continues to reinvent itself from a traditional two-product bank (deposit-taking and lending) to a multi-product financial services company that leverages on technology.

REAL ESTATE In 2014, with the complete acquisition of Lima Land, AboitizLand has added a third industrial park to its portfolio, LTC in Malvar, Batangas. The 570-hectare development is currently home to 70 locators and 30,000 employees. The industrial park, AboitizLand’s first project in Luzon, marks its entry into the national scene. For its residential business unit, AboitizLand launched additional phases of its existing developments: Pristina North Residences 2 – offering high-end house and lot products within the existing 32.5 hectare development, and the third phase of Priveya Hills, offering premium high-end lot products. AboitizLand also saw a first in the launch of Canso X, an eco-adventure park in Balamban, Cebu. The 12-hectare mountain adventure park offers its visitors the opportunity to trek, bike and camp within its grounds.


FOOD With Pilmico International’s acquisition of Vietnamese feedmill company, VHF, which was subsequently renamed as Pilmico VHF Joint Stock Company in December 2014, the Food Group now offers aquafeeds products for the different stages of growing pangasius.

(v) Competition

On the parent company level, AEV has no direct competitors. However, for reference purposes, other holding and management companies listed in the PSE can be used for comparison.

On the Subsidiary and Affiliate level, competition may be described as follows:

GENERATION BUSINESS With the privatization of the NPC-owned power generation facilities, the establishment of the WESM and the implementation of Open Access, AboitizPower’s generation facilities located in Luzon, Visayas and Mindanao continue to face competition from other power generation plants that supply electricity to the Luzon, Visayas and Mindanao grids. In particular, SN Aboitiz Power-Magat, SN Aboitiz Power-Benguet, APRI and TLI face competition from leading multinationals such as AES Corporation, TeaM Energy, GN Power and Korea Electric Power Corporation, as well as power generation facilities owned or controlled by Filipino-owned companies, such as Global Business Power Corporation, Trans-Asia Power Generation Corporation, AC Energy Holdings Corporation, First Gen Corporation, DMCI Holdings, Inc. and San Miguel Energy Corporation. With the commencement of Open Access, these foreign and local generation companies have already set up their own RES businesses. Despite the suspension of the issuance of RES licenses in May 2013, aggressive competition from those with existing licenses is still expected. Additional competition for Open Access customers can come from entities that may not generate power but have RES operations by acting as demand aggregators. In addition, RES licenses have now been in existence for two years. At this stage, contracts entered into by these RES are expiring. AboitizPower now faces both the challenges and opportunities brought forth by these expiring contracts across the industry. AboitizPower’s success will be measured by its ability to retain contracts and to obtain quality contracts from competition. AboitizPower is facing competition in both the development of new power generation facilities and the acquisition of existing power plants, as well as competition in financing these activities. The improving performance of the Philippine economy, the presence of a market to sell, such as the WESM, and the potential shortfall in energy supply have attracted many potential competitors, including multinational development groups and equipment suppliers, to explore opportunities in electric power generation projects in the Philippines. Also, the new guidelines for FIT limit the total installed capacity for each renewable technology eligible for FIT rates. Accordingly, competition for and from new power projects may increase in line with the expected long-term economic growth of the Philippines. As a Group, with a portfolio of different types of energy sources, AboitizPower is also facing challenges on how to sell its additional capacity without affecting the Group’s existing share in the market. For instance, developing an energy source with lower cost may lead customers to shift to this source while freeing up the capacity of other plants within the Group. These challenges lead the Group to continuously look for better ways


to market its capacity in line with its mission of ensuring sustainable energy for its customers. DISTRIBUTION BUSINESS

Each of AboitizPower’s Distribution Utilities currently has an exclusive franchise to distribute electricity in the areas covered by its franchise. Under Philippine law, the franchises of the Distribution Utilities may be renewed by the Congress of the Philippines provided that certain requirements related to the rendering of public services are met. Each Distribution Utility intends to apply for the extension of its franchise upon expiration. Distribution Utilities may face competition or opposition from third parties in connection with the renewal of their franchises. It should be noted that under Philippine law, a party wishing to secure a franchise to distribute electricity must first obtain a CPCN from the ERC, which requires that such party proves that it has the technical and financial competence to operate a distribution franchise, and that there is a need for such franchise. Ultimately, the Philippine Congress has absolute discretion in determining whether to issue new franchises or to renew existing franchises. The acquisition by competitors of any of the Distribution Utilities’ franchises could adversely affect the results of the Company’s operations. However, with the commencement of Open Access in Luzon and Visayas, the supply segment of the distribution business has become a contestable market, initially for customers with at least an average of 1 MW monthly demand. FINANCIAL SERVICES

As of December 2014, the Philippine Banking System (PBS) is composed of approximately 648 banking institutions, approximately 36 of which are categorized as universal and commercial banks, approximately 69 as thrift banks and approximately 543 as rural and cooperative banks. To ensure stability and resilience of the PBS, it operates within a highly-regulated environment. As such, deposit and loan products of banking institutions are highly homogenous, differentiated mainly through product pricing and service delivery. The total resources (valued at gross of amortization, depreciation and allowance for probable losses) of the PBS stands at about P11.2 trillion (tn) as of end-2014, up by 11.9% from the previous year. The universal and commercial banks account for 90% of the total resources. Total loan portfolio, excluding reverse repurchase agreements, expanded by 19.7% ending December 2014 at P5.2 tn. As of December 2014, UnionBank ranks seventh largest in resources, deposits and capital, per published consolidated financial statements (parent bank and financial allied subsidiaries), as reflected in the market shares shown below.

20145 20136 Billion Pesos % Billion Pesos % Assets 439.7 3.9 391.1 3.9 Net Loans7 131.1 2.5 107.3 2.5 Deposits 312.2 3.7 298.6 3.9 Capital 52.0 3.8 40.9 3.6

5 Based on Consolidated Financial Reporting Package submitted to BSP 6 Supra Note 5 7 Includes loans and discounts, net of general loan loss provision and reverse repurchase agreements but excludes interbank loans

receivables


Amidst this operating environment, UnionBank leverages on its competitive advantages anchored on its superior technology, unique branch sales and service culture, and centralized backroom operations. As a result, UnionBank has been acknowledged as a leader in developing innovative products and services; and recognized as among the industry’s lowest cost producers measured by revenue-to-expense ratio and one of the most profitable in terms of return on equity, return on assets, and absolute income. UnionBank’s corporate vision is to become one of the top three universal banks in the Philippines in respect of market capitalization, profits and customer coverage, grounded on its purpose of “Making the Diff!” by connecting and enabling communities through Smart Banking in the spirit of UBUNTU. To achieve this vision, UnionBank has adopted five key strategic imperatives, referred to as “FOCUS”, which is an acronym for “Financial Value, Operational Excellence, Customer Franchise, UnionBank Brand, and Superior Innovation”.

FOOD MANUFACTURING There is a relatively high degree of competition in the domestic flour milling industry. However, because of freight and distribution costs within the Philippine archipelago, flour companies have a competitive advantage in the areas proximate to their milling plants. Pilmico’s flourmill is located in Iligan City in Northern Mindanao. The only other flour miller operating in Mindanao is Universal Robina, which has a plant in Davao.

REAL ESTATE AboitizLand faces stiff competition from local and national real estate developers, such as Ayala Land, Primary Homes, Inc. and Vista Land, Inc.

(vi) Sources of Raw Materials and Supplies

As a holding company, AEV’s primary business is not dependent on the availability of certain raw materials or supplies. Acquisition and/or purchases of raw material requirements are done at the Subsidiary or Affiliate level.

GENERATION BUSINESS AboitizPower’s hydroelectric facilities harness the energy from the flow of water from neighboring rivers to generate electricity. Some of these facilities have impounding dams allowing the storage of water for later use. The hydroelectric companies on their own, or through the NPC as in the case of LHC, possess water permits issued by the National Water Resources Board (NWRB), which allow them to utilize the energy from a certain volume of water from the applicable source of the water flow. Under the APA between APRI and PSALM for the Tiwi-MakBan geothermal facilities, the management and operation of the geothermal fields, which supply steam to the power generation units, remain with Chevron. The terms of the steam supply are governed by a GRSC under which price of steam is ultimately indexed to the Newcastle Coal Index and the Japanese Public Utilities (JPU) coal price. The effectivity of GRSC commenced on May 26, 2013. AboitizPower’s oil-fired plants use Bunker-C fuel to generate electricity. SPPC and WMPC get fuel supplies from the NPC pursuant to the terms of their respective ECAs with the NPC. Each of EAUC and CPPC has a fuel supply agreement with Petron; while TMI has existing fuel supply agreements with Shell and Petron for Mobile 1 and Mobile 2, respectively. Likewise, TMO has existing fuel supply agreements with Shell and


Petron. The fuel prices under these agreements are pegged to the Mean of Platts Singapore (MOPS) index. STEAG Power has existing long-term coal supply agreements with PT Jorong Barutama Greston of Indonesia and Samtan Co. Ltd. of Korea. Cebu Energy also has long-term coal supply agreements with Semirara Mining Corporation, OT Adaro Indonesia and Coal Orbis AG to ensure adequate supply of coal to operate its power plants. TLI has entered into long-term coal supply contracts for the Pagbilao Plant’s annual coal requirements. TLI is continuously looking at and evaluating alternative sources to ensure security of supply. DISTRIBUTION BUSINESS Most of AboitizPower’s Distribution Utilities have bilateral agreements with the NPC for the purchase of electricity, which set the rates for the purchase of the NPC’s electricity. The following table sets out material terms of each of the Distribution Utility’s bilateral agreements with the NPC:

Distribution

Company Term of Agreement

with NPC Contract Energy (MWh per year)

Take or Pay

Pricing Formula

VECO Expired on December 25, 2014

834,055* Yes ERC approved NPC rate plus ERC approved adjustments

Davao Light Extended; expiring in December 2015

1,569,478 Yes ERC approved NPC rate plus ERC approved adjustments

Cotabato Light Extended; expiring in December 2015

126,353 Yes ERC approved NPC rate plus ERC approved adjustments

MEZ Extended; expiring in September 2015

125,500 Yes ERC approved NPC rate plus ERC approved adjustments

*Prior to the expiration of the Agreement with NPC on December 25, 2014

The rates at which Davao Light and SFELAPCO purchase electricity from AboitizPower’s Generation Companies are established pursuant to the bilateral agreements that are executed after the relevant Generation Company has successfully bid for the right to enter into a PPA with either Davao Light or SFELAPCO. These agreements are entered into on an arm’s-length basis, on commercially reasonable terms and are approved by the ERC. The ERC’s regulations currently restrict AboitizPower’s Distribution Utilities from purchasing more than 50% of their electricity requirements from Affiliated Generation Companies. Hedcor Sibulan supplies Davao Light with electricity generated from its Sibulan plants pursuant to the Hedcor Consortium’s 12-year PSA. To add to its power reserve capacity, Davao Light has entered into a three-year power supply contract with TMI for 15 MW last March 21, 2011, and this was provisionally approved by the ERC on May 30, 2011. On February 29, 2012, Davao Light and TMI filed a Joint Manifestation with the ERC stating that they agreed to supplement and modify their supply contract to 30 MW. Contract energy of 30 MW was made available to Davao Light starting March 1, 2012. Davao Light and Cotabato Light entered into 25-year power supply contracts with TSI for 100 MW and 5 MW, respectively, which will commence in 2016. The agreement between Cotabato Light and TSI is pending with the ERC for approval. VECO has entered into a PPA for the purchase of electric energy from CPPC for a period of 15 years starting from the commercial operation date of the latter. In 2013, the said contract with CPPC was extended for another 10 years. On October 16, 2009, VECO entered into an EPPA with Cebu Energy for the supply of 105 MW for 25 years to address VECO’s long-term power supply requirement. VECO also signed a five-year contract for the supply of power from GCGI for 60 MW at 100% load factor. GCGI


started supplying VECO on December 26, 2010. On October 23, 2014, VECO and GCGI amended the PSA extending the term for ten years at a reduced price. VECO entered into a second and third PPA with GCGI for the supply of 15 MW starting December 25, 2011 and additional 15MW starting December 25, 2012. This supply of power replaced NPC’s reduction of supply of power under its contract with VECO. On December 25, 2014, the CSEE between VECO and PSALM expired. Consequently, VECO entered into a PSA with AESI and Vivant Energy Solutions for 40 MW and 17 MW baseload supply, respectively. Peaking requirement will be partially sourced from 1590 Energy Corporation which entered into an agreement with VECO for the supply of 30MW covering six months starting from December 26, 2014. VECO secured the supply of 150 MW starting in 2018 for its long term capacity requirement through the 15-year contract between VECO and TVI. The provisions of the Distribution Utilities’ PPAs are governed by the ERC regulations. The main provisions of each contract relate to the amount of electricity purchased, the price, including adjustments for various factors such as inflation indexes, and the duration of the contract. Under the current ERC regulations, the Distribution Utilities can purchase up to 90% of their electricity requirements using bilateral contracts. Transmission Charges SFELAPCO has an existing Transmission Service Agreement (TSA) with the NGCP for the use of the latter’s transmission facilities in the distribution of electric power from the grid to its customers. All other TSAs of the Distribution Utilities with the NGCP have expired. The Distribution Utilities have negotiated agreements with the NGCP in connection with the amount and form of security deposit that they will provide to the NGCP to secure their obligations under their TSA. FOOD BUSINESS Pilmico and its Subsidiaries import wheat, soybean meal and other grains mostly from various suppliers in the U.S.A., Canada and Australia. Pilmico VHF imports soybean meal from Argentina and the U.S.A, cassava from Cambodia while rice bran and other grains are sourced locally from various suppliers in Vietnam.

(vii) Major Customers

As a holding company providing management services, AEV’s principal customers are its Subsidiaries and associates.

POWER GENERATION AND DISTRIBUTION Out of the total electricity sold by AboitizPower’s Generation Companies, 87% are covered by bilateral contracts with, among others, private distribution utilities, electric cooperatives, NPC, industrial and commercial companies. The remaining 13% is sold by the Generation Companies through the WESM. Most of AboitizPower’s Distribution Companies, on the other hand, have wide and diverse customer bases. As such, the loss of any one customer will have no material adverse impact on AboitizPower. The Distribution Companies’ customers are categorized into four principal categories:


a) Industrial customers. Industrial customers generally consist of large-scale consumers of electricity within a franchise area, such as factories, plantations and shopping malls.

b) Residential customers. Residential customers are those who are supplied electricity for use in a structure utilized for residential purposes.

c) Commercial customers. Commercial customers include service-oriented businesses, universities and hospitals.

d) Other customers.

Government accounts for various government offices and facilities are categorized as either commercial or industrial depending on their load. Each Distirbution Utility monitors government accounts separately and further classifies them to local government accounts, national government account, special government accounts like military camps. Street Lights have a different rate category and are thus monitored independently. REAL ESTATE AboitizLand’s residential projects currently targets a range of customers from middle to upper income brackets, and are not dependent on any single customer base. It is AboitizLand’s industrial division, a recurring business, operated through CIPDI, which is dependent on Tsuneishi Holdings Corporation (THC) of Japan. THI, a shipbuilding facility operator, is the main locator of WCIP, whose other smaller locators also service the operations of THC. OTHER SUBSIDIARIES AND AFFILIATES

AEV’s other Subsidiaries and Affiliates have a wide and diverse customer base. As such, the loss of any one customer will have no material adverse impact on AEV.

(viii) Transactions With and/or Dependence on Related Parties

AEV and its subsidiaries (the Group), in their regular conduct of business, have entered into related party transactions consisting of professional and technical services, rental, money market placements, and power sales and purchases. These are made on an arm’s length basis. ACO, the parent company of AEV, and certain associates have service contracts with either AEV or AboitizPower (parent companies) for corporate center services rendered, such as human resources, internal audit, legal, treasury and corporate finance, among others. These services are obtained from AEV and AboitizPower to enable the Group to realize cost synergies. The parent companies maintain a pool of highly qualified professionals with business expertise specific to the businesses of the Group. Transactions are priced on an arm’s length basis, and covered with Service Level Agreements to ensure quality of service. ACO and certain associates are leasing office spaces from Cebu Praedia Development Corporation, a Subsidiary of AEV. Rental rates are comparable with prevailing market prices. These transactions are covered with lease contracts for a period of three years. The Group has cash deposits and money market placements with Union Bank of the Philippines and City Savings Bank, Inc., AEV's banking associates. These are earning interest at prevailing market rates.


Power generation subsidiaries sell to certain power associates based on their respective power supply agreements. Meanwhile, power distribution subsidiaries purchase from certain generation associates based on existing power purchase agreements. A wholly-owned construction and steel fabrication subsidiary of ACO renders its services to the Group for the construction of new power plants. The Company’s retirement benefit fund (the “Fund”) is in the form of a trust being maintained and managed by ACO. The Fund has investments in the equity of one of its subsidiaries. The above related party transactions are discussed extensively in the audited financial statements of the Company. No other transaction, without proper disclosure, was undertaken by the Company in which any director or executive officer, any nominee for election as director, any beneficial owner (direct or indirect) or any member of his immediate family was involved or had a direct or indirect material interest. AEV employees are required to promptly disclose any business and family-related transactions with the Company to ensure that potential conflicts of interest are determined and brought to the attention of management.

(ix) Patents, Copyrights and Franchises

GENERATION BUSINESS Power generation is not considered a public utility operation under the EPIRA. Thus, a franchise is not needed to engage in the business of power generation. Nonetheless, no person or entity may engage in the generation of electricity unless such person or entity has complied with the standards, requirements and other terms and conditions set by the ERC and has received a COC from the ERC to operate a generation facility. A COC is valid for a period of five years from the date of issuance. A generation company must ensure that all its facilities connected to the grid meet the technical design and operational criteria of the Philippine Grid Code and Philippine Distribution Code. The ERC has also issued Resolution 17 Series of 2013 “A Resolution Adopting and Approving the Rules and Procedures to Govern the Monitoring of Reliability Performance of Generating Units and Transmission System”, which adopts the reliability performance indicators for generation companies and transmission system. Included in the Rules is the reporting requirement of generation companies. Additionally, a generation company must meet the minimum financial capability standards set out in the Guidelines for the Financial Standards of Generation Companies issued by the ERC. Under the said guidelines, a generation company is required to meet a minimum annual interest cover ratio or debt service coverage ratio of 1.5x throughout the period covered by its COC. For COC applications and renewals, the same guidelines require the submission to the ERC of, among other things, comparative audited financial statements, schedule of liabilities and a five-year financial plan. For the duration of the COC, these guidelines also require a generation company to submit to the ERC audited financial statements and forecast financial statements for the next two fiscal years, among other documents. Failure by a generation company to submit the requirements so prescribed by the guidelines may be a ground for the imposition of fines and penalties.


AboitizPower's Distribution Utilities, Davao Light and Cotabato Light, have their own generation facilties and are required under the EPIRA to obatin a COC from the ERC for its generation facilities. An IPPA such as TLI is not required to obtain a COC, it is nevertheless required, along with all entities owning and operating generation facilities, to comply with technical, financial and environmental standards provided by existing laws and regulations for their operations. AboitizPower’s Generation Companies, which operate hydroelectric facilities, are also required to obtain water permits from the NWRB for the water flow used to run their respective hydroelectric facilities. These permits specify the source of the water flow that the Generation Companies can use for their hydroelectric generation facilities, as well as the allowable volume of water that can be used from the source of the water flow. Water permits have no expiration date and generally are not terminated by the Government as long as the holder of the permit complies with the terms of the permit regarding the use of the water flow and the allowable volume. Under Department Circular No. 2010-03-0003 dated February 26, 2010 of the DOE, generation companies are enjoined to ensure the availability of its generation facilities at all times subject only to technical constraints duly communicated to the system operator in accordance with existing rules and procedures. For this purpose, generation companies shall have, among others, the following responsibilities:

a) All generation companies shall operate in accordance with their maximum available capacity which shall be equal to the registered maximum capacity of the (aggregate) unit less: (1) forced unit outages, (2) scheduled unit outages, and (3) de-rated capacity due to technical constraints which include: (i) plant equipment related failure and ambient temperature, (ii) hydro constraints which pertain to limitation on the water elevation/ turbine discharge and megawatt output of the plant, and (iii) geothermal constraints which pertain to capacity limitation due to steam quality, steam pressure and temperature variation, well blockage and limitation on steam and brine collection and disposal system;

b) Oil-based generation companies shall maintain an adequate in-country stocks of fuel equivalent to at least 15 days of running inventory which includes shipments in transit;

c) Coal power plants shall ensure the required 30-day coal running inventory which includes shipments in transit;

d) During scheduled maintenance of the Malampaya natural gas facilities, all affected generation companies shall maintain at least 15 days of running inventory of alternative fuel and shall operate at full capacity;

e) All generation companies with natural gas-fired geothermal and hydroelectric generating plants shall submit to the DOE a monthly report on the current status and forecast of the energy sources of its generating plants;

f) All generation companies must notify and coordinate with the system operator of any planned activity such as the shutdown of its equipment;

g) All generation companies must immediately inform the DOE of any unexpected shutdown or de-rating of the generating facility or unit thereof; and

h) Generation Companies shall seek prior clearance from the DOE regarding any plans for deactivation or mothballing of existing generating units or facilities critical to the reliable operation of the grid.

The Generation Companies, Davao Light and Cotabato Light possess COCs for their generation businesses, details of which are as follows:


Title of Document

Issued under the name of

Power Plant Date of

Issuance Type Location Capacity Fuel Years of

Service

COC No. 08-11- GXT 33-0033L

Hedcor, Inc.

Hydro Irisan 3 – Tadlangan, Tuba, Benguet

1.20 MW

Hydro 10

November 5, 2013

Hydro Bineng 1 – Bineng, La Trinidad, Benguet

3.2 MW Hydro 10


2.0 MW Hydro 10

Hydro Bineng 2B – Bineng, La Trinidad, Benguet

0.75 MW Hydro 10


5.625 MW Hydro 10

Hydro Ampohaw – Banengbeng, Sablan, Benguet

8.00 MW Hydro 10

Hydro Sal-angan – Ampucao, Itogon, Benguet

2.40 MW Hydro 10

COC No. 12-04- GN 268-19259L

Hedcor, Inc. Hydro Irisan 1- Tadiangan, Tuba, Benguet

3.896 MW Hydro 25

April 30, 2012 COC No. 11-05- GXT 286b-0331M

Hedcor, Inc. (Talomo

Hydroelectric Power Plant)

Hydro Talomo 1 – Calinan, Davao City

1,000 kW Hydro 2

20

Hydro Talomo 2 – Mintal Proper, Davao City 600 kW Hydro 20

Hydro Talomo 2A – Upper Mintal, Davao City 650 kW Hydro 20

Hydro Talomo 2B – Upper Mintal, Davao City 300 kW Hydro 20

Hydro Talomo 2 – Catalunan, Pequeño, Davao City

1,920 kW Hydro 20

COC No. 08-11- GXT 32-0032L

Hedcor, Inc.

Hydro FLS Plant – Poblacion, Bakun, Benguet

5.90 MW

Hydro

10

November 5, 2013

Hydro

Lower Labay, Ampusongan, Bakun, Benguet

2.40 MW

Hydro 10

Hydro Lon-Oy – Poblacion, Bakun, Benguet

3.60 MW Hydro 10

COC No. 11- 07-GXT 17273- 17584M

Hedcor Sibulan, Darong

Diesel Engine

Brgy. Darong, Sta. Cruz, Davao del Sur

363 kW

Diesel

15

July 7, 2011


Title of Document


Power Plant Date of


Service COC No. 11- 07-GXT 17272- 17583M

Hedcor Sibulan, Tibolo Diesel Engine Brgy. Tibolo, Sta.

Cruz, Davao del Sur 323 kW Diesel 15 July 7, 2011

COC No. 11- 07-GXT 17269- 17580M

Hedcor, Inc. Talomo 2 Diesel Engine Proper Mintal,

Davao City 20 kW Diesel 15 July 7, 2011

COC No. 11- 07-GXT 17271- 17582L

Hedcor, Inc. La Trinidad

(Beckel

Diesel Engine

214 Beckel, La Trinidad, Benguet 216 kW Diesel 15 July 7, 2011

COC No. 11-07- GXT 17270 - 17581M

Hedcor, Inc. Talomo 3 Diesel Engine

Brgy. Catalunan, Pequeño, Davao City

20 MW Diesel 15 July 7, 2011

COC No. 10-08 GN-56-16881

Hedcor Sibulan, Inc.

Hydroelectric Power Plant

A

Hydro Brgy. Sibulan, Sta. Cruz, Davao del Sur

16.328 MW Hydro 25 August 9, 2010

COC No. 10-05- GN 54-16816

Hedcor Sibulan, Inc.

(Plant B) Hydroelectric Brgy. Sibulan, Sta.

Cruz, Davao de Sur 26,257

kW Hydro 25 May 24, 2010

COC No. 14-03- GN 346-20102M

Hedcor Sibulan, Inc. (Tudaya 1)

Hydro Sitio Tudaya, Brgy. Sibulan, Sta. Cruz, Davao del Sur

6.65 MW Hydro 15 March 10,

2014

COC No. 08-07- GXT 17-0017

Luzon Hydro Corporation

Hydro Amilongan, Alilem, Ilocos Sur

74.80 MW Hydro 25 July 22, 2013

Stand-by Power

Amilongan, Alilem, Ilocos Sur 280 kW Diesel 15 July 7, 2011

COC No. 14-04- GN 349-20137M

Hedcor Tudaya, Inc. Hydro Brgy. Astorga, Sta.

Cruz, Davao del Sur 8.14 MW Hydro 25 April 11, 2014

COC No. 10- 12-GXT 13701- 13728M

Davao Light & Power

Company, Inc.

Bunker C-Fired

J.P. Laurel Ave., Bajada, Davao City

58.7 MW

Blended Fuel 25

December 1, 2010

Blackstart Generator Sets

J.P. Laurel Ave., Bajada, Davao City

105.60 kW Diesel 25

Diesel Engine J.P. Laurel Ave., Bajada, Davao City 80 kW Diesel 25

Diesel Engine J.P. Laurel Ave., Bajada, Davao City 80 kW Diesel 25


Title of Document


Power Plant Date of


Service

Diesel Engine J.P. Laurel Ave., Bajada, Davao City 41.6 kW Diesel 25

COC No. 11- 12-GXT 15911- 16153M

Cotabato Light & Power

Company

Bunker C-Fired Diesel Engine

CLPCI Compound, Sinsuat Ave., Cotabato City

9.927 MW

Diesel/ Bunker C 25

December 5, 2011

Blackstart CLPCI Compound, Sinsuat Ave., Cotabato City

10 kW Diesel 25

COC No. 013-06-GXT2- 0002V

East Asia Utilities

Corporation

Bunker C-Fired Power Plant

Barrio Ibo, Mactan Export Processing Zone 1, Lapu- Lapu City, Cebu

49.60 MW

Bunker C 16 June 10, 2013

COC No. 13-05-GXT1- 0001V

Cebu Private Power

Corporation


Old VECO Compound, Brgy. Ermita, Cebu City

70.65 MW Bunker C 25 May 27, 2013

COC No. 13-08-GXT20- 0020M

Western Mindanao

Power Corporation


Malasugat, Brgy. Sangali, Zamboanga City

112 MW Bunker C 24

August 5, 2013

Blackstart Malasugat, Brgy. Sangali, Zamboanga City

160 MW Diesel 24

COC No. 13-08-GXT21- 0021M

Southern Philippines

Power Corporation


Brgy. Baluntay, Alabel, Saranggani

61.72 MW

Bunker C / Diesel 18 August 5, 2013

COC No. 10-11- GXT 286O-13433L

SN Aboitiz Power –

Magat, Inc. (Magat


Hydroelectric Magat River, Brgy. Aguinaldo, Ramon, Isabela

360 MW Hydro 23

November 22, 2010

Blackstart Generator Set

Magat River, Brgy. Aguinaldo, Ramon, Isabela

320 kW Diesel 23

COC No. 13-07 GXT309-19969L


Benguet, Inc. (Binga


Hydroelectric Power Plant

Brgy. Tinongdan, Itogon, Benguet

125.8 MW Hydro 50 July 29, 2013

COC No. 10-11 GXT286M-13429L

Blackstart Generator Set

Brgy. Tinongdan, Itogon, Benguet

355.4 kW Diesel 5 November 15,

2010


Title of Document


Power Plant Date of


Service

COC No. 11-08- GN 87-17671L


Benguet, Inc. (Ambuklao


Hydroelectric Brgy. Ambuklao, Bokod, Benguet

104.55 MW Hydro 50

August 31, 2011

Blackstart Brgy. Ambuklao, Bokod, Benguet 2.28MW Diesel 20

COC No. 11-05 GN 16-15880M

STEAG State Power, Inc.

Coal fired

Park V, Phividec, Industrial Estate, Balacanas, Villanueva, Misamis Oriental

232 MW Coal 50

May 31, 2011

Emergency Generating Set

Park V, Phividec, Industrial Estate, Balacanas, Villanueva, Misamis Oriental

1.25 MW Diesel 25

COC No. 10-05- GXT 286e-7833

AP Renewables,

Inc. (Mak-Ban

Geothermal Power Plant)

Geothermal

Brgy. Bitin, Bay, Laguna

Plant A 126.40

MW

Geo-thermal Steam

20

May 31, 2010

Brgy. Bitin, Bay, Laguna

Plant D 40 MW 20

Brgy. Limao, Tamlong, Calauan, Laguna

Plant B 126.40

MW 20

Brgy. Limao, Tamlong, Calauan, Laguna

Plant C 126.40

MW 20

Brgy. Sta. Elena, Sto. Tomas, Batangas

Plant E 40 MW

20

COC No. 10-12- GXT 286r-13736L

AP Renewables,

Inc. (Tiwi

Geothermal Power Plant)

Geothermal Brgy. Cale, Tiwi, Albay

Plant A 234 MW

Steam 10 December 1, 2010

Plant C 114 MW

COC No. 06- 04-GXT 286aa- 14632

Ormat – MakBan

Binary GPP Geothermal

Brgy. Sta. Elena, Sto. Tomas, Batangas/ Brgy. Bitin Bay, Laguna/ Brgy. Tamlong, Calauan, Laguna

15.73 MW

Geothermal Brine 14 April 6, 2006*

COC No. 11- 04-GXT 286gg- 15074M

Therma Marine, Inc.

[Mobile 1 (M1)]

Bunker C-Fired

Brgy. San Roque, Maco, Compostela Valley

100.33 MW

Bunker C / Diesel

30 April 4, 2011


Title of Document


Power Plant Date of


Service

Blackstart

Brgy. San Roque, Maco, Copostela Valley

1.75 MW

Diesel 30

COC No. 11- 04-GXT 286bb- 14632M

Therma Marine, Inc.

[Mobile 2 (M2)]

Bunker C-Fired

Nasipit, Agusan del Norte

100.33 MW

Bunker C / Diesel 30 April 4, 2011

*Plant is currently not operational but considered for possible future commissioning. Renewal of COC is put on hold.

AboitizPower’s Generation Companies which operate hydroelectric facilities are also required to obtain water permits from the NWRB for the water flow used to run their respective hydroelectric facilities. These permits specify the source of the water flow that the Generation Companies can use for their hydroelectric generation facilities, as well as the allowable volume of water that can be used from the source of the water flow. Water permits have no expiration date and are generally not terminated by the Government as long as the holder of the permit complies with the terms of the same regarding the use of the water flow and the allowable volume. DISTRIBUTION BUSINESS Under the EPIRA, the business of electricity distribution is a regulated public utility business that requires a national franchise that can be granted only by the Congress of the Philippines. In addition to the legislative franchise, a CPCN from the ERC is also required to operate as a public utility. Except for Distribution Utilities operating within ecozones, all Distribution Utilities possess franchises granted by Philippine Congress. All Distribution Utilities are required to submit to the ERC a statement of their compliance with the technical specifications prescribed in the Distribution Code (which provides the rules and regulations for the operation and maintenance of distribution systems) and the performance standards set out in the implementing rules and regulations of the EPIRA. Shown below are the respective expiration periods of the Distribution Utilities’ legislative franchises:

Distribution Company Expiration Date

VECO 2030

Davao Light 2025

Cotabato Light 2039

SFELAPCO 2035

SEZ8 2028

8 Pursuant to the Disitribution Management Service Agreement (DMSA) with the Subic Bay Metropolitan Authority


MEZ, BEZ and Lima Enerzone, which operate the power distribution utilities in MEPZ II, WCIP and LTC, respectively, are duly registered with PEZA as Ecozone Utilities Enterprises. Cotabato Light’s franchise was renewed for another 25 years upon the President’s signing of RA 10637 on June 16, 2014.

SUPPLY BUSINESS

For a time, the business of supplying electricity was being undertaken solely by franchised distribution utilities. However, on July 26, 2013, the implementation of Open Access commenced in Luzon and Visayas. Like power generation, the business of supplying electricity under Open Access not considered a public utility operation under the EPIRA. However, it is considered a business affected with public interest. As such, the EPIRA requires all suppliers of electricity to end-users in the contestable market, other than distribution utilities within their franchise areas, to obtain a license from the ERC in accordance with the ERC’s rules and regulations. With the implementation of Open Access, AboitizPower’s Subsidiaries, AESI, AdventEnergy and Prism Energy, obtained separate licenses to act as RES and Wholesale Aggregator. BANKING BUSINESS As banking institutions, the business operations of UnionBank and CitySavings are regulated by BSP, SEC and Philippine Deposit Insurance Commission. CitySavings, as an accredited lender institution under DepEd’s APDS, also has to comply with the policies issued by Department of Education with regard to the setting of interest rates and other fees on loans to public school teachers. TRADEMARKS AEV and its Subsidiaries own, or have pending applications for the registration of intellectual property rights for various trademarks associated with their corporate names and logos. The following table sets out information regarding the trademark applications which AEV and its Subsidiaries have filed with the Philippine Intellectual Property Office (IP Office).

Trademarks Applicant Date Filed Registration

Number/ Date Issued

Certificate of Description Status

Cleanergy (Class No. 42)

Aboitiz Power Corporation

October 19, 2001

4-2001- 07900

January 13,

2006

Application for trademark “Cleanergy”

Original Certificate of Registration for the mark CLEANERGY was issued on January 13, 2006. The 3rd year Anniversary DAU was filed on November 11, 2014 with the IP Office. The 5th year Anniversary Declaration of Actual Use (DAU) was filed last December 27, 2011 with the IP Office.



Number/ Date Issued


10th year Anniversary DAU or application for renewal of registration is due for filing on January 13, 2016.

Cleanergy and Device (Class No. 42)


July 30, 2002

4-2002- 06293

July 16, 2007

Application for trademark “Cleanergy and Device” with the representation of a light with bulb with three leaves attached to it, with the words “CLEANERGY” and a small “ABOITIZ” diamond logo below it.

Original Certificate of Registration No. 4-2002-06293 was issued on July 16, 2007. The 3rd year Anniversary DAU was filed on June 28, 2015 with the IP Office. The 5th year Anniversary DAU was filed last July 15, 2013 with the IP Office. 10th year Anniversary DAU or application for renewal of registration is due for filing on July 16, 2017.

A Better Future (Class Nos. 39, 40 and 42)


April 23, 2010

4-2010- 004383

November 11, 2010

Application for trademark “A Better Future”

Original Certificate of Registration was issued on November 11, 2010. The 3rd year Anniversary DAU was filed on April 23, 2013 with the IP Office. The 5th year Anniversary of DAU or application for renewal of registration is due for filing on November 11, 2015.

Better Solutions (Class Nos. 39, 40 and 42)


April 23, 2010

4-2010- 004384

November

Application for trademark “Better Solutions”

Original Certificate of Registration was issued on November 11, 2010.



Number/ Date Issued


11, 2010 The 3rd year Anniversary DAU was filed on April 23, 2013 with the IP Office. The 5th year Anniversary DAU or application for renewal of registration is due for filing on November 11, 2016.

Cleanergy Get it and Device (Class Nos. 39, 40 and 42)


April 23, 2010

4-2010- 004381

November 11, 2010

Application for trademark “Cleanergy Get it and Device”. The word “Cleanergy” with the phrase “get it” below it with both words endorsed by representation of a thumbs up sign. The whole mark is rendered in two shades of green.

Original Certificate of Registration was issued on November 11, 2010. The 3rd year Anniversary DAU was filed on April 23, 2013 with the IP Office. The 5th Anniversary year DAU or application for renewal of registration is due for filing on November 11, 2016.

AboitizPower wordmark (Class Nos. 39, 40 and 42)


April 23, 2010

4-2010- 004385

November 11, 2010

Application for “AboitizPower” wordmark.

Original Certificate of Registration was issued on November 11, 2010. The 3rd year Anniversary DAU was filed on April 23, 2013 with the IP Office. The 5th year Anniversary DAU is due for filing on November 11, 2016.

Cleanergy got it & Device (Class Nos. 39, 40 and 42)


April 23, 2010

4-2010- 004382

November

Application for trademark “Cleanergy got it & device”. The word “Cleanergy” with the phrase “got it” below it with both words enclosed by a

Original Certificate of Registration was issued on November 11, 2010. The 3rd year Anniversary DAU was filed on April 23, 2013 with the IP



Number/ Date Issued


representation of a thumbs up sign. The whole mark is rendered in two shades of green.

Office. The 5th year DAU or application for renewal of registration is due for filing on November 11, 2015.

AboitizPower Spiral Device (Class Nos. 39, 40 and 42)


April 23, 2010

4-2010- 004380

February 10,

2011

Application for trademark “AboitizPower Spiral and Device” The representation of a spiral rendered in blue.

Original Certificate of Registration was issued on February 10, 2011. The 3rd year Anniversary DAU was filed on April 23, 2013 with the IP Office. The 5th year Anniversary DAU or application for renewal of registration is due for filing on February 10, 2016.

AboitizPower and Device (Class Nos. 39, 40 and 42)


April 23, 2010

4-2010- 004379

February 10,

2011

Application for trademark “AboitizPower and Device” The words “Aboitiz” and “Power” rendered in two shades of blue with the representation of a spiral above the words “A Better Future” below it.

Original Certificate of Registration was issued on February 10, 2011. The 3rd year Anniversary DAU was filed on April 23, 2013 with the IP Office. The 5th year Anniversary DAU or application for renewal of registration is due for filing on February 10, 2017.

Alterspace (Class Nos. 9, 39 and 40)


April 6, 2011

4-2011- 003968

February 24,

2012

Application for “ALTERSPACE” word mark.

Original Certificate of Registration was issued on February 24, 2012. The 3rd year Anniversary DAU was filed on May 20, 2014 with the IP Office. The 5th year



Number/ Date Issued


Anniversary DAU or application for renewal of registration is due for filing on February 24, 2017.

Alterspace and Device (Class Nos. 9, 39 and 40)


May 31, 2011

4-2011- 006291

December 22, 2011

Application for trademark “Alterspace and Device”. A globe with the words “alter” and “space” inside an arrow circling the globe and separating the words. The globe is rendered in forest green, while the words and arrow are rendered in lime green.

Original Certificate of Registration was issued on December 22, 2011. The 3rd year Anniversary DAU was filed on May 20, 2014 with the IP Office. The 5th year Anniversary DAU or application for renewal of registration is due for filing on December 22, 2016.

iEngage (Class Nos. 39, 40 and 42)


February 7, 2014

04-2014- 001638

August 28,

2014

Application for “iEngage” word mark.

Original Certificate of Registration was issued on August 28, 2014. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on February 7, 2017.

Aboitiz Energy Solutions and Deivce (w/ color claim) (Class No. 42)

Aboitiz Energy Solutions, Inc.

January 25, 2007

4-2007- 000784

September

3, 2007

Application for trademark ABOITIZ ENERGY SOLUTIONS and Device with color claim.

Original Certificate of Registration was issued on September 3, 2007. The 3rd year Anniversary DAU was filed with the IP Office on February 4, 2010. The 5th year DAU was filed with the IP Office last August 30, 2013. The 10th year DAU or application for renewal of registration is due



Number/ Date Issued


for filing on September 3, 2017.

iEngage MyPortal (Class Nos. 39, 40 and 42)


February 7, 2014

04-2014- 001637

August 28,

2014

Application for “iEngage MyPortal” wordmark.


iEngage MyBill (Class Nos. 39, 40 and 42)


February 7, 2014

04-2014- 001636

August 28,

2014

Application for “iEngage MyBill” wordmark.


iEngage MyTax (Class Nos. 39, 40 and 42)


February 7, 2014

04-2014- 001635

August 28,

2014

Application for “iEngage MyTax” wordmark.


Subic EnerZone Corporation and Logo (with color claim) (Class No. 39)

Subic EnerZone Corporation

July 6, 2006

4-2006- 007306

August 20,

2007

Trademark application for Subic EnerZone Corporation and Logo (blue and yellow). The mark consists of the words “SUBIC ENERZONE” in fujiyama extra bold font with the word “CORPORATION” below it, also in fujiyama font, rendered in cobalt medium blue color, and a

Original Certificate of Registration was issued on August 20, 2007. The 3rd year Anniversary DAU was filed with the IP Office on July 6, 2009. The 5th year Anniversary DAU was filed with the IP Office on June 5, 2013. The 10th year



Number/ Date Issued


representation of the letter “S” taking the shape of a flame (the company logo) above the words. The logo is likewise rendered in the cobalt medium blue color in a yellow background.

Anniversary DAU or application for renewal of registration is due for filing on August 20, 2017.

Subic EnerZone Corporation and Logo (plain only) (Class No. 39)


July 6, 2006

4-2006- 007305

August 20, 2007

Trademark Application for Subic EnerZone Corporation word mark and logo (gray). The mark consists of the words “SUBIC ENERZONE” in fujiyama extra bold font with the word “CORPORATION” below it, also in fujiyama font, and a representation of the letter “S” taking the shape of a flame (the company logo) above the words.

Original Certificate of Registration was issued on August 20, 2007. The 3rd year Anniversary DAU was filed with the IP Office on January 6, 2010. The 5th year Anniversary DAU was filed with the IP Office on June 5, 2013. The 10th year Anniversary DAU or application for renewal of registration is due for filing on August 20, 2017.

Subic EnerZone Corporation (wordmark) (Class No. 39)


July 6, 2006

4-2006- 007304

June 4, 2007

Trademark Application for Subic EnerZone Corporation (word mark).

Original Certificate of Registration was issued on June 4, 2007. The 3rd Year Anniversary DAU was filed with the IP Office on July 6, 2009. The 5th year Anniversary DAU was filed with the IP Office on June 4, 2013. The 10th year Anniversary DAU or application for renewal of registration is due



Number/ Date Issued


for filing on June 4, 2017.

“Driven to Lead. Driven to Excel. Driven to Serve.” (wordmark) (Class Nos. 30, 36, 37, 39, 40 and 42)

Aboitiz Equity Ventures, Inc.

January 30, 2012

4-2012- 001132

June 21,

2012

Application for trademark “Driven to Lead. Driven to Excel. Driven to Serve.” (wordmark).

Original Certificate of Registration was issued on June 21, 2012. The 3rd year Anniversary DAU was filed with the IP Office on January 30, 2015. The 5th year Anniversary DAU or application for renewal of registration is due for filing with the IP Office on December 21, 2017.

“Aboitiz Better Ways” (wordmark) (Class Nos. 30, 31, 35, 36, 37, 39, 40 and 42)


December 18, 2013

4-2013- 015095

March 27,

2014

Application for trademark “Aboitiz Better Ways” (wordmark).

Original Certificate of Registration was issued on March 27, 2014. The 3rd year Anniversary DAU or application for renewal of registration is due for filing with the IP Office on December 18, 2016.

“Aboitiz Better World” (wordmark) (Class Nos. 30, 31, 35, 36, 37, 39, 40 and 42)


December 18, 2013

4-2013- 015094

March 27,

2014

Application for trademark “Aboitiz Better World” (word mark)

Original Certificate of Registration was issued on March 27, 2014. The 3rd year Anniversary DAU or application for renewal of registration is due for filing with the IP Office on December 18, 2016.

"ABOITIZLAND GEOMETRIC SYMBOL LOGO" (w/ color claim) (Class Nos. 35 and 37)

Aboitiz Land, Inc.

May 25, 2009

4-2009- 005107

March 11,

2010

Application for trademark "ABOITIZLAND GEOMETRIC SYMBOL LOGO" (w/ color claim)

Original Certificate of Registration was issued on March 11, 2010. The 3rd year Anniversary DAU



Number/ Date Issued


was filed with the IP Office on May 21, 2012. The 5th year Anniversary DAU or application for renewal of registration is due for filing with the IP Office on March 11, 2016.

"ABOITIZLAND MADE FOR LIFE AND DEVICE" (w/ color claim) (Class Nos. 35 and 37)

Aboitiz Land, Inc.

May 25, 2009

4-2009- 005108

March 11,

2010

Application for trademark "ABOITIZLAND MADE FOR LIFE AND DEVICE" (w/ color claim)

Original Certificate of Registration was issued on March 10, 2010. The 3rd year Anniversary DAU was filed with the IP Office on May 21, 2012. The 5th year Anniversary DAU or application for renewal of registration is due for filing with the IP Office on March 11, 2016.

"ABOITIZLAND AND DEVICE" (w/ color claim) (Class Nos. 35 and 37)

Aboitiz Land, Inc.

May 25, 2009

4-2009- 005109

March 11,

2010

Application for trademark "ABOITIZLAND AND DEVICE" (w/ color claim)

Original Certificate of Registration was issued on March 11, 2010. The 3rd year Anniversary DAU was filed with the IP Office on May 21, 2012. The 5th year Anniversary DAU or application for renewal of registration is due for filing with the IP Office on March 11, 2016.

“ABOITIZLAND” (wordmark) (Class Nos. 35 and 37)

Aboitiz Land, Inc.

July 14, 2009

4-2009- 006961

April 15,

2010

Application for trademark “ABOITIZLAND” (wordmark)

Original Certificate of Registration was issued on April 15, 2010. The 3rd year



Number/ Date Issued


Anniversary DAU was filed with the IP Office on May 21, 2012. The 5th year Anniversary DAU or application for renewal of registration is due for filing with the IP Office on April 15, 2016.

“THE OUTLETS” (wordmark) (Class Nos. 16, 35 and 37)

Aboitiz Land, Inc. April 11, 2014

04-2014- 004494

Application for trademark “THE OUTLETS” (wordmark)

This application is currently pending with the IP Office.

"THE OUTLETS AND DEVICE" (w/ color claim) (Class Nos. 16, 35 and 37)

Aboitiz Land, Inc.

April 11, 2014

4-2014- 004493

Application for trademark "THE OUTLETS AND DEVICE" (w/ color claim)

This application is currently pending with the IP Office.

“SUN-MOON-STAR “ (Class No. 30)

Pilmico Foods Corporation

January 2, 2002

4-2002- 100524

October 2,

2006

Application for trademark “SUN-MOON-STAR “

Original Certificate of Registration was issued on October 2, 2006. The 3rd year Anniversary DAU was filed with the IP Office on January 21, 2005. The 5th year Anniversary DAU was filed with the IP Office on May 4, 2012. The 10th year Anniversary DAU or application for renewal of registration is due for filing with the IP Office on October 2, 2016.

“GOLD STAR AND DEVICE” (Class No. 30)


January 2, 2002

4-2002- 000525

August 17,

2006

Application for trademark “GOLD STAR AND DEVICE”

Original Certificate of Registration was issued on August 17, 2006. The 3rd year



Number/ Date Issued


Anniversary DAU was filed with the IP Office on January 21, 2005. The 5th year Anniversary DAU was filed with the IP Office on May 4, 2012. The 10th year Anniversary DAU or application for renewal of registration is due for filing with IP Office on August 17, 2016.

“SUNSHINE” (Class No. 30)


April 17, 1996

4-996- 127942

October 15,

2007

Application for trademark “SUNSHINE”

Original Certificate of Registration was issued on October 15, 2007. The 3rd year Anniversary DAU was filed with the IP Office on November 29, 2001. The 5th year Anniversary DAU was filed with the IP Office on May 17, 2013. The 10th year Anniversary DAU or application for renewal of registration is due for filing with the IP Office on October 15, 2017.

“GLOWING SUN” (Class No. 30)


November 13, 1998

4-1998- 008409

October 2,

2006

Application for trademark “GLOWING SUN”

Original Certificate of Registration was issued on October 2, 2006. The 3rd year Anniversary DAU was filed with the IP Office on November 13, 2001. The 5th year



Number/ Date Issued


Anniversary DAU was filed with the IP Office on May 4, 2012. The 10th year Anniversary DAU or application for renewal of registration is due for filing on October 2, 2016.

“WOODEN SPOON” (Class No. 30)


March 15, 1991

4-1991- 00054939

May 4, 1993

Application for trademark “WOODEN SPOON”

Original Certificate of Registration was issued on May 4, 1993. Petition for Renewal was filed on May 6, 2013.

“PILMICO FOODS CORP.” (Class No. 30)


October 26, 1998

4-1998- 007886

November 28, 2005

Application for trademark “PILMICO FOODS CORP.”

Original Certificate of Registration was issued on November 28, 2005. The 3rd year Anniversary DAU was filed with the IP Office on October 26, 2001. The 5th year Anniversary DAU was filed with the IP Office on September 1, 2011. The 10th year Anniversary DAU or application for renewal of registration is due for filing on November 28, 2015.

KUTITAP AND DEVICE (Class No. 30)


October 26, 2001

4-2001- 008098

January 17,

2005

Application for trademark “KUTITAP AND DEVICE”

Original Certificate of Registration was issued on January 17, 2005. The 3rd year Anniversary DAU was filed with the IP Office on October 26, 2004. The 5th year



Number/ Date Issued


Anniversary DAU was filed with the IP Office on February 18, 2011. The 10th year Anniversary DAU was filed with the IP Office on January 17, 2015. Petition for renewal was filed on January 14, 2015.

KUTITAP (Class No. 30)


January 22, 2002

4-2002- 000523

December 5,

2004

Application for trademark “KUTITAP”

Original Certificate of Registration was issued on December 5, 2005. The 3rd year Anniversary DAU was filed with the IP Office on January 21, 2005. The 5th year Anniversary DAU was filed with the IP Office on January 18, 2010. The 10th year Anniversary DAU was filed with the IP Office on December 4, 2014.

MEGA STAR AND DEVICE (Class No. 30)


August 2, 2002

4-2002- 006424

November 28, 2005

Application for trademark MEGA STAR AND DEVICE

Original Certificate of Registration was issued on November 28, 2005. The 3rd year Anniversary DAU was filed with the IP Office on August 2, 2005. The 5th year Anniversary DAU was filed with the IP Office on September 1, 2011. Petition for renewal was filed on December 4, 2014.



Number/ Date Issued


DIAMOND FRESH COMPRESSED YEAST (Class No. 30)


January 8, 2004

4-2004-0138

October 16, 2006

Application for trademark DIAMOND FRESH COMPRESSED YEAST

Original Certificate of Registration was issued on October 16, 2006. The 3rd year Anniversary DAU was filed with the IP Office on January 8, 2007. The 5th year Anniversary DAU was filed with the IP Office on October 16, 2011.

STARLIGHT AND DEVICE (Class No. 30)


February 9, 2007

04-2007- 001352

Application for trademark “STARLIGHT AND DEVICE”

The 3rd year Anniversary DAU was filed with the IP Office on February 9, 2010.

SUNFLOUR AND DESIGN (Class No. 30)


June 8, 2007

04-2007- 005916

May 5, 2008

Application for trademark SUNFLOUR AND DESIGN

Original Certificate of Registration was issued on May 5, 2008. The 3rd year Anniversary DAU was filed with the IP Office on June 8, 2010. The 5th year Anniversary DAU was filed with the IP Office on March 7, 2013. The 10th year Anniversary DAU or application for renewal of registration is due for filing on May 5, 2018.

PILMICO FLOUR (Class No. 30)


December 19, 2008

4-2008- 015334

July 30, 2009

Application for trademark “PILMICO FLOUR”

Original Certificate of Registration was issued on July 30, 2009. The 3rd year Anniversary DAU was filed with the IP Office on October 18, 2011.



Number/ Date Issued


The 5th year Anniversary DAU was filed with the IP Office on July 29, 2014. The 10th year Anniversary DAU or application for renewal of registration is due for filing on July 30, 2019.

PILMICO CORPORATE Logo (Class No. 30)

Pilmico Food Corporation

December 19, 2008

4-2008- 015335

November 26, 2009

Application for trademark PILMICO CORPORATE Logo

Original Certificate of Registration was issued on November 26, 2009. The 3rd year Anniversary DAU was filed with the IP Office on October 18, 2011. The 5th year Anniversary DAU was filed with the IP Office on November 25, 2014. The 10th year Anniversary DAU or application for renewal of registration is due for filing on November 26, 2019.

PILMICO ‘M’ handshake (Class No. 30)

Pilmico Food Corporation

October 13, 2009

4-2009- 010359

August 12, 2010

Application for trademark PILMICO ‘M’ handshake

Original Certificate of Registration was issued on August 12, 2010. The 3rd year Anniversary DAU was filed with the IP Office on September 11, 2012. The 5th year Anniversary DAU or application for renewal of registration is due for filing on August 11, 2015.



Number/ Date Issued


“Silver Star” wordmark (Class No. 30)


August 31, 2011

04-2011- 010284

February 24,

2012

Application for trademark “Silver Star” wordmark

Original Certificate of Registration was issued on February 24, 2012. The 3rd year Anniversary DAU was filed with the IP Office on August 22, 2014. The 5th year Anniversary DAU or application for renewal of registration is due for filing on February 23, 2017.

Silver Star Logo (Class No. 30)


September 13, 2011

04-2011- 010919

January 31,

2012

Application for trademark "Silver Star Logo"

Original Certificate of Registration was issued on January 31, 2012. The 3rd year Anniversary DAU was filed with the IP Office on August 22, 2014. The 5th year Anniversary DAU or application for renewal of registration is due for filing on January 13, 2017.

STAR BEAM HARD WHEAT FLOUR (Class No. 30)


June 10, 2013

4-2013- 006659

February 20,

2014

Application for trademark "STAR BEAM HARD WHEAT FLOUR"

Original Certificate of Registration was issued on February 20, 2014. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on June 10, 2016.

SOLA ALL PURPOSE FLOUR (Class No. 30)


June 10, 2013

4-2013- 006660

February 20,

2014

Application for trademark "SOLA ALL PURPOSE FLOUR"

Original Certificate of Registration was issued on February 20, 2014. The 3rd year Anniversary DAU or application for



Number/ Date Issued


renewal of registration is due for filing on June 10, 2016.

SUN RAYS HARD WHEAT FLOUR MADRID APPLICATION (Class No. 30)


July 9, 2013

1173337

September 12, 2013

Application for trademark SUN RAYS HARD WHEAT FLOUR MADRID APPLICATION

Original Certificate of Registration was issued on September 12, 2013. The date of renewal will be on July 9, 2023.

STAR BEAM SOFT WHEAT FLOUR MADRID APPLICATION (Class No. 30)


July 9, 2013

1171572

August 22, 2013

Application for trademark STAR BEAM SOFT WHEAT FLOUR MADRID APPLICATION


STAR BLAZE WHEAT FLOUR MADRID APPLICATION (Class No. 30)


July 9, 2013

1173338

September 12, 2013

Application for trademark STAR BLAZE WHEAT FLOUR MADRID APPLICATION


LUNA CAKE FLOUR MADRID APPLICATION (Class No. 30)


July 9, 2013

1173339

September 12, 2013

Application for trademark LUNA CAKE FLOUR MADRID APPLICATION


SUN STREAM HARD WHEAT FLOUR MADRID APPLICATION (Class No. 30)


July 9, 2013

1173340

September 12, 2013

Application for trademark SUN STREAM HARD WHEAT FLOUR MADRID APPLICATION


PILMICO (Class No. 31)


August 7, 2013

4-2013- 00009422

December 26, 2013

Application for trademark PILMICO

Original Certificate of Registration was issued on December 26, 2013. The 3rd year Anniversary DAU or



Number/ Date Issued


application for renewal of registration is due for filing on August 7, 2016.

PILMICO FLOUR (Class No. 31)


August 7, 2013

4-2013- 00009423

February 20,

2014

Application for trademark PILMICO FLOUR

Original Certificate of Registration was issued on February 20, 2014. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on August 7, 2016.

“PIGROW” (logo with color claim) (Class Nos. 31 and 44)

Filagri, Inc.

February 28, 2012

4-2012- 002465

September

28, 2012

Application for trademark “PIGROW” (logo with color claim)

Original Certificate of Registration was issued on September 28, 2012. The 3rd year Anniversary DAU was filed with the IP Office on February 28, 2015. The 5th year Anniversary DAU or application for renewal of registration is due for filing on September 28, 2018.

“PIGATIN” (logo with color claim) (Class Nos. 31 and 44)

Filagri, Inc.

February 28, 2012

4-2012- 002464

July 12, 2012

Application for trademark “PIGATIN” (logo with color claim)

Original Certificate of Registration was issued on July 12, 2012. The 3rd year Anniversary DAU was filed with the IP Office on February 28, 2015. The 5th year Anniversary DAU or application for renewal of registration is due for filing on July 12, 2018.



Number/ Date Issued


“PIGROW MATERNA” wordmark (Class Nos. 31 and 44)

Filagri, Inc.

February 28, 2012

4-2012- 002463

May 24,

2012

Application for trademark “PIGROW MATERNA” wordmark

Original Certificate of Registration was issued on May 24, 2012. The 3rd year Anniversary DAU was filed with the IP Office on February 28, 2015. The 5th year Anniversary DAU or application for renewal of registration is due for filing on May 28, 2018.

PORK SOLUTIONS (Class No. 31)

Pilmico Animal Nutrition

Corporation

January 4, 2006

4-2006- 000130

August 20,

2007

Application for trademark PORK

SOULTIONS

Original Certificate of Registration was issued on August 20, 2007. The 3rd year Anniversary DAU was filed with the IP Office on January 5, 2009. The 5th year Anniversary DAU was filed with the IP Office on October 19, 2012. The 10th year Anniversary DAU or application for renewal of registration is due for filing on August 20, 2017.

FARM SOLUTIONS (Class No. 31)


Corporation

January 4, 2006

4-2006- 000131

August 20,

2007

Application for trademark FARM

SOLUTIONS

Original Certificate of Registration was issued on August 20, 2007. The 3rd year Anniversary DAU was filed with the IP Office on January 5, 2009. The 5th year Anniversary DAU



Number/ Date Issued


was filed with the IP Office on August 20, 2013. The 10th year Anniversary DAU or application for renewal of registration is due for filing on August 20, 2017.

POULTRY SOLUTIONS (Class No. 31)


Corporation

January 4, 2006

4-2006- 000132

August 20,

2007

Application for trademark POULTRY

SOLUTIONS

Original Certificate of Registration was issued on August 20, 2007. The 3rd year Anniversary DAU was filed with the IP Office on January 5, 2009. The 5th year Anniversary DAU was filed with the IP Office on October 19, 2012. The 10th year Anniversary DAU or application for renewal of registration is due for filing on August 20, 2017.

CIVIC (Class No. 31)


Corporation

August 10, 2012

4-2012- 00009841

June 6, 2013

Application for trademark

CIVIC

Original Certificate of Registration was issued on June 6, 2013. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on August 10, 2015.

TAMERA (Class No. 31)


Corporation

August 10, 2012

4-2012- 00009856

June 6, 2013

Application for trademark TAMERA

Original Certificate of Registration was issued on June 6, 2013. The 3rd year Anniversary DAU or application for renewal of



Number/ Date Issued


registration is due for filing on August 10, 2015.

MEGA (Class No. 31)


Corporation

August 10, 2012

4-2012- 00009854

June 6, 2013


MEGA


PILMICO ANIMAL NUTRITION (Class No. 31)


Corporation

August 10, 2012

4-2012- 00009849

June 6, 2013

Application for trademark PILMICO ANIMAL NUTRITION


AQUAMAX (Class No. 31)


Corporation

August 10, 2012

4-2012- 00009857

June 6, 2013

Application for trademark AQUAMAX


CLASSIC (Class No. 31)


Corporation

August 10, 2012

4-2012- 009844

April 14,

2013


CLASSIC

Original Certificate of Registration was issued on April 14, 2013. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on August 10, 2015.

ULTIMAX (Class No. 31)


Corporation

August 10, 2012

4-2012- 009845

April 14,

2013

Application for trademark ULTIMAX

Original Certificate of Registration was issued on April 14, 2013.



Number/ Date Issued


The 3rd year Anniversary DAU or application for renewal of registration is due for filing on August 10, 2015.

POULTRY EXPRESS (Class No. 31)


Corporation

August 10, 2012

4-2012- 009847

April 14,

2013

Application for trademark POULTRY

EXPRESS


ELITE (Class No. 31)


Corporation

August 10, 2012

4-2012- 009843

April 14, 2013

Application for trademark ELITE


ALAS NG SALTO (Class No. 31)


Corporation

September 25, 2012

4-2012- 011803

February 28,

2013


ALAS NG SALTO

Original Certificate of Registration was issued on February 28, 2013. Original Certificate of The 3rd year Anniversary DAU or application for renewal of registration is due for filing on September 25, 2015.

AVE MAX (Class No. 31)


Corporation

August 10, 2012

4-2012- 009848

February 8,

2013

Application for trademark AVE MAX

Original Certificate of Registration was issued on February 8, 2013. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on August



Number/ Date Issued


10, 2015.

SALTO (Class No. 31)


Corporation

August 10, 2012

4-2012- 009850

February 8,

2013


SALTO


PIT DOMINANCE (Class No. 31)


Corporation

August 10, 2012

4-2012- 009851

February 8,

2013


PIT DOMINANCE


ANGAT SARADO (Class No. 31)


Corporation

August 10, 2012

4-2012- 009852

February 8, 2013

Application for trademark ANGAT

SARADO


BASIC (Classic No. 31)


Corporation

August 10, 2012

4-2012- 009853

February 8,

2013


BASIC


LAKAS GATAS (Class No. 31)


Corporation

August 10, 2012

4-2012- 009842

February 8,

2013

Application for trademark LAKAS

GATAS

Original Certificate of Registration was issued on February 8, 2013.



Number/ Date Issued


The 3rd year Anniversary DAU or application for renewal of registration is due for filing on August 10, 2015.

GALLIMAX (Class No. 31)


Corporation

August 10, 2012

4-2012- 009846

February 8,

2013

Application for trademark GALLIMAX


SUPREMECON (Class No. 31)


Corporation

March 21, 2011

4-2011- 003166

July 22, 2011


SUPREMECON

Original Certificate of Registration was issued on July 22, 2011. The 3rd year Anniversary DAU was filed with the IP Office on March 21, 2014. The 5th year Anniversary DAU or application for renewal of registration is due for filing on July 22, 2017.

POWERMIX (Class No. 31)


Corporation

June 10, 2011

4-2011- 006860

January 13,

2012


POWERMIX

Registration was issued on January 13, 2012. The 3rd year Anniversary DAU was filed with the IP Office on June 10, 2014. The 5th year Anniversary DAU or application for renewal of registration is due for filing on January 13, 2018.

PILMICO FEEDS (Class No. 31)


September 8, 2011

4-2013- 010731


Original Certificate of Registration was



Number/ Date Issued


Corporation

March 8,

2012

FEEDS

issued on March 8, 2012. The 3rd year Anniversary DAU was filed with the IP Office on September 8, 2014. The 5th year Anniversary DAU or application for renewal of registration is due for filing on March 8 2018.

XPRESS (Class No. 31)


Corporation

June 24, 2013

4-2013- 007288

December 26, 2013

Application for trademark XPRESS

Original Certificate of Registration was issued on December 26, 2013. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on June 24, 2016.

POWERGUARD (Class No. 31)


Corporation

June 24, 2013

4-2013- 007289

December 26, 2013

Application for trademark POWERGUARD

Original Certificate of Registration was issued on December 26, 2013. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on June 24, 2016.

INFEED DEWORMER (Class No. 31)


Corporation

June 24, 2013

4-2013- 007290

March 13,

2014

Application for trademark INFEED DEWORMER

Original Certificate of Registration was issued on March 13, 2014. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on June 24, 2016.

GROW YOUR PROFIT – TAGLINE (Class Nos. 31


Corporation

July 3, 2013

4-2013- 007729

December

Application for trademark GROW YOUR PROFIT - TAGLINE

Original Certificate of Registration was issued on December 26, 2013.



Number/ Date Issued


and 44) 26, 2013 The 3rd year Anniversary DAU or application for renewal of registration is due for filing on July 3, 2016.

PARTNERS FOR GROWTH (Class No. 31)


Corporation

January 15, 2010

4-2010- 000543

July 16, 2010

Application for trademark PARTNERS FOR GROWTH

Original Certificate of Registration was issued July 16, 2010. The 3rd year Anniversary DAU was filed with the IP Office on January 15, 2013. The 5th year Anniversary DAU or application for renewal of registration is due for filing on July 16, 2016.

P-NOX (Class No. 31)


Corporation

June 26, 2013

4-2013- 007450

December 26, 2013

Application for trademark P-NOX

Original Certificate of Registration was issued December 26, 2013. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on June 26, 2016.

PILMICO FARMS LOGO (Class No. 31)


Corporation

August 7, 2013

4-2013- 009415

April 17,

2014


FARMS LOGO

Original Certificate of Registration was issued April 17, 2014. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on August 7, 2016.

PILMICO FEEDS (Class No


Corporation

August 7, 2013

4-2013- 009416

April 17,

2014


FEEDS

Original Certificate of Registration was issued April 17, 2014. The 3rd year Anniversary DAU or



Number/ Date Issued


application for renewal of registration is due for filing on August 17, 2016.

GROWING PIG LOGO (Class Nos. 31 and 44)


Corporation

August 7, 2013

4-2013- 009417

April 17, 2014


GROWING PIG LOGO


GROWING CHICKEN LOGO (Class Nos. 31 and 44)


Corporation

August 7, 2013

4-2013- 009418

April 17,

2014


GROWING CHICKEN LOGO


GROWING QUAIL LOGO (Class Nos. 31 and 44)


Corporation

August 7, 2013

4-2013- 009419

April 17,

2014

Application for trademark GROWING QUAIL LOGO


GROWING PIGEON LOGO (Class Nos. 31 and 44)


Corporation

August 7, 2013

4-2013- 009420

April 17,

2014

Application for trademark GROWING PIGEON LOGO


GROWING DUCK LOGO (Class Nos. 31 and 44)


Corporation

August 7, 2013

4-2013- 009421

December

Application for trademark GROWING DUCK LOGO

Original Certificate of Registration was issued on December 26, 2013.



Number/ Date Issued


26, 2013 The 3rd year Anniversary DAU or application for renewal of registration is due for filing on August 7, 2016.

“Mata ng Bagyo.” (wordmark) (Class No. 42)

WeatherPhilippines Foundation, Inc.

April 15, 2013

4-2013- 004262

October 31,

2013

Application for trademark “Mata ng Bagyo.” (wordmark)

Original Certificate of Registration was issued on October 31, 2013. The 3rd year Anniversary DAU or application for renewal of registration is due for filing on April 15, 2016.

“Weather Philippines and Logo” (with color claim) (Class No. 42)


March 18, 2013

4-2013- 002959

Application for trademark “WeatherPhilippines and Logo” (with color claim)

The 3rd year Anniversary DAU or application for renewal of registration is due for filing on March 18, 2016.

“My Philippines. My Weather.” (wordmark) (Class No. 42)


March 18, 2013

4-2013- 002961

Application for trademark “My Philippines. My Weather.” (wordmark)

The 3rd year Anniversary DAU or application for renewal of registration is due for filing on March 18, 2016.

“Payong Panahon” (wordmark) (Class No. 42)


April 15, 2013

4-2013- 004261

Application for trademark “My Philippines. My Weather.” (wordmark)

The 3rd year Anniversary DAU or application for renewal of registration is due for filing on April 15, 2016.

(x) Government Approvals

The discussion on the need for any government approval of principal products or services of the Company and its Subsidiaries, including COCs obtained by the Generation Companies and franchises obtained by the Distribution Utilities, is included in Item (ix) Patents, Copyrights and Franchises.


(xi) Effect of Existing or Probable Governmental Regulations

Balanced Housing Development Section 18 of RA 2729, otherwise know as The Urban Development and Housing Act of 1992, requires every developer of a proposed subdivision project to develop a socialized housing project or enter a joint venture agreement with a Local Government Unit (LGU) to develop a socialized housing project. Regulation in the Practice of Real Estate Service The Real Estate Service Act of the Philippines (RA 9646) professionalizes real estate services, such as real estate brokerage, by requiring a licensure examination and registration. AboitizLand deals exclusively with licensed brokers to sell its products and services. Wholesale Electricity Spot Market (WESM) The WESM is a mechanism established by the EPIRA to facilitate competition in the production and consumption of electricity. It aims to provide the mechanism for identifying and setting the price of actual variations from the quantities transacted under contracts between sellers and purchasers of electricity by (a) establishing the merit order dispatch instructions for specific time periods; (b) determining the market clearing price for such time periods; (c) reflecting accepted economic principles; and (d) providing a level playing field to all electric power industry participants. The WESM provides an avenue whereby generators may sell power, and at the same time suppliers and wholesale consumers can purchase electricity where no bilateral contract exists between the two. Where there are such bilateral contracts, these contracts are nevertheless declared in the market but only to determine the appropriate merit order of generators. Settlement for bilateral contracts between the contracting parties will, however, occur outside the market. Traded electricity not covered by bilateral contracts will be settled through the market on the basis of the market clearing prices for each of the trading periods. An amended Joint Resolution No. 2 was issued by DOE, ERC and PEMC on December 27, 2013 adjusting the WESM Offer Price Cap. In this resolution, the Offer Price Ceiling of π62,000.00 per MWh as set by the WESM Tripartite Committee was reduced to π32,000.00 per MWh. This price cap is provisional in nature and shall be subject to public consultations and review by the WESM Tripartite Committee. In May 2014, the ERC issued an urgent resolution which established a mechanism to impose an interim secondary price cap of P6,245.00 per MWh in the WESM. In December 2014, the ERC adopted a permanent pre-emptive mitigation measure, where the price cap of P6,245.00 per MWh would be imposed in the event the average spot price in WESM would exceed P9,000.00 per MWh over a rolling seven-day period. The Philippine Independent Power Producers Association, Inc. (PIPPA) has filed in the Regional Trial Court of Pasig City a petition for declaratory relief on the ground that the resolutions establishing the interim secondary price cap and the permanent pre-emptive mitigation measure are invalid and void. Interim Mindanao Electricity Market (IMEM) The DOE issued DC No. 2013-01-0001 on January 9, 2013 establishing the Interim Mindanao Electricity Market (IMEM). The IMEM intends to address the supply shortage in Mindanao through transparent and efficient utilization of available capacities.


However, there were some deficiencies on the processes of the IMEM that led to its inability to collect from customers and to pay the generators. Though the IMEM started in December 2013, it has been suspended indefinitely after three months of operation. Retail Competition and Open Access (Open Access)

The EPIRA provides for a system of Open Access to transmission and distribution wires, whereby Transco, its concessionaire, the NGCP, and any distribution utility may not refuse the use of their wires by qualified persons, subject to the payment of transmission and distribution retail wheeling charges. Conditions for the commencement of Open Access are as follows:

• Establishment of the WESM; • Approval of unbundled transmission and distribution wheeling charges; • Initial implementation of the cross subsidy removal scheme; • Privatization of at least 70% of the total capacity of generating assets of NPC in

Luzon and Visayas; and • Transfer of the management and control of at least 70% of the total energy

output of power plants under contract with NPC to the IPPAs.

As provided in the EPIRA, Open Access shall be implemented in phases. The WESM began operations in Luzon in June 2006 and in Visayas in December 2010. In 2011, the ERC motu proprio initiated proceedings to determine whether Open Access may already be declared in Luzon and Visayas. Following various public hearings, the ERC declared December 26, 2011 as the Open Access Date when full operations of the competitive retail electricity market in Luzon and Visayas should commence. All electricity end-users with an average monthly peak demand of one MW for the 12 months preceeding December 26, 2011, as certified by the ERC to be contestable customers, were given the right to choose their own electricity suppliers. However, on October 24, 2011, upon the request of MERALCO, Private Electric Power Operators Association and Philippine Rural Electric Cooperatives Association, Inc. for re-evaluation of the feasibility of the December 26, 2011 Open Access Date, the ERC declared the deferment of the implementation of Open Access in Luzon and Visayas by reason of the inadequacy of rules, systems, preparations and infrastructure required therefor. In 2012, the ERC, together with the DOE and PEMC, worked on the development of the Transitory Rules to govern the initial implementation of Open Access, which rules were finalized and issued by the ERC in December 2012. Under the said rules, the ERC declared December 26, 2012 as the Open Access Date, while the period from December 26, 2012 to June 25, 2013 was declared as the Transition Period during which the required systems, processes and information technology structure relating to Open Access will be developed and finalized, and registration of retail electricity suppliers and contestable customers into the WESM database will be instituted. The period from June 26, 2013 to December 25, 2013 will cover the initial commercial operation of Open Access. From December 26, 2013 onwards, full retail competition will be implemented, with PEMC assigned to perform the functions of the Central Registration Body tasked to undertake the development and management of the required systems, processes and information technology structure and the settlement of transactions in the WESM relating to Open Access. In Mindanao, a truly competitive environment required by Open Access is not expected in the near future because the largest generating asset owned by NPC in Mindanao has yet to be privatized. In December 2013, however, the IMEM commenced operations to address the supply shortfall in the grid through the utilization of available resources such that all registered generating facilities are mandated to fully account for their capacities in the market.


In December 2013, ERC issued revised licensing regulations for RES operating in the retail supply segment. In the ERC revised rules, no RES licenses will be issued to generating companies, IPPA and affiliates of distribution utilities during a transition period or until the ERC deems appropriate in consideration of market conditions. Additional restrictions were provided such as: (1) including the contracted capacity of the RES in the grid limitations imposed on the total capacity controlled by its affiliate generation companies; (2) limiting the supply by a RES to its affiliate end-users up to 50% of the RES’ capacity; and (3) limiting the supply by a generation company to its affiliate RES up to 50% of the generation requirements of such RES. The Retail Electricity Suppliers Association of the Philippines, Inc. (RESA) has filed in the Regional Trial Court of Pasig City a petition for declaratory relief with an urgent application for an injunction on the ground that the revised rules are unconstitutional and invalid. On October 22, 2014, the ERC issued Resolution No. 17, Series of 2014, which holds in abeyance the evaluation of RES license applications and suspends the issuance of RES licenses pending the ERC’s promulgation of the amended RES License Rules. Unbundling of Rates and Removal of Subsidies

The EPIRA mandated the unbundling of distribution and wheeling charges from retail rates, with such unbundled rates reflecting the respective costs of providing each service. It also mandated the removal of cross subsidies other than the lifeline rate for marginalized end-users which shall subsist for a period of 20 years, unless extended by law. The lifeline rate is a socialized pricing mechanism set by ERC for low-income, captive electricity consumers who cannot afford to pay the full cost of electricity. Implementation of the Performance-based Rating-setting Regulation (PBR) On December 13, 2006, the ERC issued the Rules for Setting Distribution Wheeling Rates (RSDWR) for privately-owned distribution utilities entering PBR for the second and later entry points, setting out the manner in which this new PBR rate-setting mechanism for distribution-related charges will be implemented. PBR replaces the Return-on-Rate Base (RORB) mechanism which has historically determined the distribution charges paid by customers. Under PBR, the distribution-related charges that distribution utilities can collect from customers over a four-year regulatory period is set by reference to projected revenues which are reviewed and approved by ERC and used by ERC to determine the distribution utility’s efficiency factor. For each year during the regulatory period, the distribution utility’s distribution-related charges are adjusted upwards or downwards taking into consideration the utility’s efficiency factor as against changes in overall consumer prices in the Philippines. The ERC has also implemented a PIS whereby annual rate adjustments under PBR will take into consideration the ability of a distribution utility to meet or exceed service performance targets set by ERC, such as the: (1) average duration of power outages; (2) average time of restoration to customers; and (3) average time to respond to customer calls, with utilities being rewarded or penalized depending on their ability to meet these performance targets. The second regulatory period of Cotabato Light ended on March 31, 2013, while that of VECO and Davao Light ended on June 30, 2014. A reset process should have been initiated 18 months prior to the start of the third regulatory period of April 1, 2013 to March 31, 2017 for Cotabato Light, and July 1, 2014 to June 30, 2018 for VECO and Davao Light. The reset process, however, has been delayed due to the issuance by the ERC in 2013 of an Issues Paper on the Implementation of PBR for distribution utilities under the RSDWR. Said paper aims to revisit various matters relating to the reset


process. The ERC has solicited comments from industry participants and has been holding public consultations on the Issues Paper. For SEZ and SFELAPCO’s third regulatory year covering October 1, 2013 to September 30, 2014, SEZ was able to implement the new rate schedule in April 2014 while SFELAPCO’s implementation began in September 2014. In October and November 2014, SFELAPCO and SEZ, respectively filed their rate translation application for the fourth regulatory year. Said applications are still pending review with the ERC.

Compliance with the Philippine Distribution Code and the Philippine Grid Code Each of AboitizPower’s Distribution Utilities has submitted to ERC a Compliance Monitoring Report based on a self-assessment of a distribution utility’s compliance with the Philippine Distribution Code. These Compliance Monitoring Reports were accompanied by Compliance Plans which outline the activities and projects to be undertaken by a distribution utility to fully comply with the prescribed technical, performance and financial standards of the Philippine Distribution Code. Similarly, APRI, TMI and Hedcor have submitted to the ERC their respective Grid Compliance Monitoring Reports based on self-assessments of their compliance with all prescribed technical specifications and performance standards of the Philippine Grid Code. Reliable and attainable Compliance Plans accompanied these reports to outline the activities and projects that will cause compliance by a generation company with the requirements of the Philippine Grid Code.

Reduction of Taxes and Royalties on Indigenous Energy Resources

EPIRA mandates the President of the Philippines to reduce the royalties, returns and taxes collected for the exploitation of all indigenous sources of energy, including but not limited to, natural gas and geothermal steam, so as to effect parity of tax treatment with the existing rates for imported coal, crude oil, bunker fuel and other imported fuels. Following the promulgation of the implementing rules and regulations, former President Gloria Macapagal-Arroyo enacted Executive Order No. 100 to equalize the taxes among fuels used for power generation. Proposed Amendments to the EPIRA

Since the enactment of the EPIRA, members of Congress have proposed various amendments to the law and its implementing rules and regulations. A summary of the significant proposed amendments are as follows:

• Classification of power projects as one of national significance and imbued with

public interest; • Exemption from VAT of the sale of electricity by generation companies; • Modification of the definition of the term “Aggregator,” which is proposed to

mean a person or entity engaged in consolidating electric power demands of end-users of electricity in the contestable market, for the purpose of purchasing, reselling, managing for optimum utilization of the aggregated demand, or simply pooling the tendering process in looking for a supply of electricity on a group basis;

• Requirement for distribution utilities to conduct public and competitive selection processes or Swiss challenges for the supply of electricity and tofully or adequately contract their future and current energy and demand requirements;

• Grant of access to electric cooperatives over the missionary electrification fund collected through universal charges;


• Exclusion of the following items from the rate base charged by Transco and distribution utilities to the public: corporate income tax, value of the franchise, value of real or personal property held for possible future growth, costs of over-adequate assets and facilities, and amount of all deposits as a condition for rendition and continuation of service;

• Regulation of generation, transmission, distribution and supply rates to allow RORB up to 12%;

• Classification of power generation and supply sectors as public utilities, which would be required to secure legislative franchises;

• Prohibition of cross-ownership between generation companies and distribution utilities or any of their subsidiaries, affiliates, stockholders, officials or directors, or the officials, directors, or other stockholders of such subsidiaries or affiliates, including the relatives of such stockholders, officials or directors within the fourth civil degree of consanguinity;

• Prohibition against or restriction on distribution utilities from sourcing electric power supply requirements, under bilateral electric power supply contracts, from a single generation company or from a group of generating companies wholly-owned or controlled by the same interests;

• Lowering of the allowable extent of ownership, operation and control of a company or related groups as determined from the installed generating capacity of the grid and/or nationally installed generating capacity;

• Exemption or deferral of the privatization of some assets of NPC, such as the Unified Leyte (Tongonan) Geothermal Complexes, Agus and Polangui Complexes and Angat Dam;

• Expansion of the definition of host communities to include all barangays, municipalities, cities and provinces or regions where hydro generation facilities are located and where waterways or water systems that supply water to the dam or hydroelectric power generating facility are located;

• Prohibition on distribution utilities, except rural electric cooperatives to recover systems losses and placing a 5% cap on recoverable system loss;

• Imposition of a uniform franchise tax for distribution utilities equivalent to 3% of gross income in lieu of all taxes;

• Grant of authority for NPC to generate and sell electricity from remaining assets;

• Removal of the requirement of a joint congressional resolution before the President may establish additional power generating capacity in case of imminent shortage of supply of electricity; and

• Creation of a consumer advocacy office under the organizational structure of the ERC.

The Renewable Energy Act of 2008 (RE Law) The RE Law was signed into law by Former President Arroyo on December 16, 2008 and became effective in January 2009. Among the RE Law’s declared policies is to accelerate and develop the use of the country’s renewable energy (RE) resources to (a) reduce the country’s dependence on fossil fuels, thereby minimizing exposure to price fluctuations in the international markets, and (b) reduce or prevent harmful emissions and promote a healthy and sustainable environment. The RE Law imposes a government share on existing and new RE development projects at a rate of 1% of the gross income from sale of renewable energy and other incidental income from generation, transmission and sale of electric power, except for indigenous geothermal energy which shall be at a rate of 1.50% of gross income. Proceeds from micro-scale projects for communal purposes and non-commercial operations, not


exceeding 100 kW, and proceeds from the development of biomass resources will not be subject to the said government share. The RE Law offers fiscal and non-fiscal incentives to RE developers, including developers of hybrid systems, subject to certification by the DOE in consultation with the BOI. These incentives include an ITH for the first seven years of commercial operations; duty-free importations of RE machinery, equipment and materials effective within ten years upon issuance of certification, provided, said machinery, equipment and materials are directly and actually needed and exclusively used in RE facilities; special realty tax rates on civil works, equipment, machinery and other improvements of a registered RE developer not exceeding 1.50% of the net book value; net operating loss carry-over; corporate tax rate of 10% after the seventh year; accelerated depreciation; zero-percent VAT on sale of fuel or power generated from RE sources and other emerging sources using technologies such as fuel cells and hydrogen fuels and on purchases of local supply of goods, properties and services needed for the development, construction and installation of RE facilities; cash incentives for missionary electrification; tax exemption on the sale of carbon emission credits; and tax credit on domestic purchases of capital equipment and services. All fiscal incentives apply to all RE capacities upon the effectivity of the RE Law. RE producers from intermittent RE resources are given the option to pay transmission and wheeling charges on a per kilowatt-hour basis at a cost equivalent to the average per kilowatt-hour rate of all other electricity transmitted through the grid. Qualified and registered RE generators with intermittent RE resources shall be considered “must dispatch” based on available energy and shall enjoy the benefit of priority dispatch. Electricity generated from RE resources for the generator’s own consumption and/or for free distribution to off-grid areas is exempt from the universal charge. The RE Law further provides financial assistance from government financial institutions for the development, utilization and commercialization of renewable energy projects, as may be recommended and endorsed by the DOE. Pursuant to Department Circular No. DO2009-05-008 dated May 25, 2009 (Rules and Regulations Implementing the Renewable Energy Act of 2008), the DOE, the BIR and the Department of Finance (DOF) shall, within six months from its issuance, formulate the necessary mechanism and/or guidelines to implement the entitlement to the general incentives and privileges of qualified RE developers. However, as of this date, no specific guidelines or regulations have been issued by the relevant implementing agencies. Such being the case, the RE companies of AboitizPower, such as APRI, LHC, Hedcor Sibulan, Hedcor Tamugan, SN Aboitiz Power-Magat and SN Aboitiz Power -Benguet, filed on August 6, 2010 a request before the BIR Law Division for a ruling on the application of zero-rated value-added tax on all its local purchases of goods and services needed for the development of RE plant facilities, exploration and development of RE sources and their conversion into power. To date, the said request is still pending with the BIR Law Division. In Resolution No. 10, Series of 2012, the ERC adopted the following FIT and degression rates for electricity generated from biomass, run-of-river hydropower, solar and wind resources:

FIT Rate (phP/kWH) Degression Rate

Wind 8.53 0.5% after year 2 from effectivity of FIT Biomass 6.63 0.5% after year 2 from effectivity of FIT Solar 9.68 6% after year 1 from effectivity of FIT

Hydro 5.90 0.5% after year 2 from effectivity of FIT


Acting upon the application of the Transco, as Fund Administrator of the FIT Allowance (FIT-All), the ERC provisionally approved the FIT-All of P0.0406 per kWh, which may be collected from all On-Grid electricity consumers beginning January 2015. In early 2014, the ERC issued the guidelines on the collection of the FIT-All and the disbursement of the FIT-All Fund by Transco. The FIT-All shall be a uniform charge to be collected for the guaranteed payment of the FIT for electricity generator from emerging renewable energy technologies and actually delivered to the transmission and/or distribution network by RE developers. The distribution utilities and RES entities will start collecting the FIT-All from their respective customers in February 2015. Similarly, in 2013, the ERC had issued the rules enabling the net metering program for RE. The rules, among others, seek to encourage end-users to participate in RE generation by requiring distribution utilities, upon the request of a distribution end-user with an installed RE system, to enter into a net metering agreement with such end-user, subject to technical considerations and without discrimination. The National Renewable Energy Board (NREB) is presently in the process of preparing the Renewable Portfolio Standards which, under the RE Law, shall be a market-based policy requiring electricity suppliers to source an agreed portion of their energy supply from eligible RE resources.

ERC Regulation on Systems Loss Cap Reduction Under ERC Resolution No. 17, Series of 2008, the actual recoverable systems losses of distribution utilities was reduced from 9.50% to 8.50%. The new systems loss cap was implemented in January 2010. Under this regulation, actual company use of electricity shall be treated as an expense of the distribution utilities, particularly, as an O&M expense in the PBR applications. In December 2009, VECO and Cotabato Light filed separate petitions in the ERC for the deferment of the implementation of the systems loss cap of 8.50%, citing circumstances peculiar to their respective franchises and beyond the control of VECO and Cotabato Light that affect the system loss incidence in their areas. Although these petitions remain pending before the ERC, unaccounted systems losses of VECO and Cotabato Light as of the end of 2014 stood at 7.83% and 8.26%, respectively. Proposed Power Supply Agreement (PSA) Rules In October 2013, ERC introduced the draft “Rules Governing the Execution, Review and Evaluation of Power Supply Agreements Entered into by Distribution Utilities for the Supply of Electricity to their Captive Market”. In the proposed rules, a distribution utility is required to undertake a competitive selection process before contracting for supply of electricity to its captive market, and ERC shall establish a benchmark rate that shall serve as reference price to assess the price that a generation company may offer. The draft rules also provide that the ERC’s decision on a power supply agreement shall be binding on the parties and any termination or “walk-away” clause shall not be allowed. AboitizPower submitted its position paper to the ERC stating that the proposed rules will violate the equal protection clause of the 1987 Philippine Constitution and the mandate and intent of the EPIRA in connection with the ERC’s regulatory power. As of date, public consultations on the proposed rules were concluded and AboitizPower is still awaiting the final rules from the ERC.


Pricing and Cost Recovery Mechanism (PCRM) Reserves are forms of ancillary services that are essential to the management of power system security. The provision of reserves facilitates the orderly trading, and ensures the quality of electricity. As provided in the WESM Rules, when reasonably feasible, the Market Operator, in coordination with the System Operator, shall establish and administer a spot market for the purchase of certain reserve categories. The reserve categories that shall be traded in the WESM are regulating, contingency and dispatchable reserves as well as interruptible loads in lieu of reserves. The WESM Reserve PCRM is intended to supplement the WESM Price Determination Methodology for purposes of providing the details of formula and procedures by which reserve trading amounts and reserve cost recovery charges for the categories of reserve that will be traded in the WESM are calculated. Once approved by the ERC, this Reserve PCRM will apply to all reserve categories traded in the WESM and will supersede, to this extent, the Ancillary Services Cost Recovery Mechanism of the Transco. The Reserve PCRM covers the determination of (1) reserve trading amounts of reserve providers; (2) reserve cost recovery charges; and (3) administered reserve prices and reserve cost recovery charges. As of date, the Reserve PCRM is the subject of an application by the Market Operator, which is pending the approval of the ERC. On December 2, 2014, DOE Circular No. 2014-12-0022, otherwise known as the Central Scheduling and Dispatch of Energy and Contracted Reserves, was issued. The Circular aims to prepare the market participants in the integration of ancillary reserves into the WESM. The ancillary service providers will be paid based on their respective ASPAs with NGCP, while the scheduling of capacity and energy will be based on market results. Proposed Joint Resolution for the Establishment of Additional Generating Capacity On September 12, 2014, President Benigno S. Aquino III requested the House of Representatives and the Senate for authority to establish additional generating capacity. The President cited the DOE’s report and projection of a critical electricity situation in the summer of 2015 in Luzon arising from the expected effects of the El Niño phenomenon, the 2015 Malampaya turnaround, increased and continuing outages of power plants, and anticipated delays in the commissioning of committed power projects. After due deliberation, the Philippines House of Representatives (House) approved House Joint Resolution No. 21, entitled “A Joint Resolution Authorizing the President of the Philippines, His Excellency Benigno S. Aquino III, to Provide for the Establishment of Additional Generating Capacity as Mandated by Republic Act No. 9136, also known as the “Electric Power Industry Reform Act (EPIRA)”, to Effectively Address the Projected Electricity Shortage in the Luzon Grid from March 1, 2015 to July 31, 2015 .” On the other hand, the Philippine Senate (Senate) approved Senate Joint Resolution No. 12, entitled “A Joint Resolution Authorizing the President of the Philippines, His Excellency Benigno S. Aquino III to Address the Projected Electricity Imbalance in the Luzon Grid and Providing the Terms and Conditions Therefor”. A bicameral conference committee was constituted to reconcile the provisions of said House and Senate versions of the Joint Resolution. However, as of date, no bicameral conference committee version has been approved. The Joint Resolution aims to address the projected critical power supply situation in Luzon through the expansion of the ILP, acceleration of power projects and energy efficiency programs.


(xii) Amount Spent on Research and Development Activities

AEV and its Subsidiaries do not allocate specific amounts or fixed percentages for research and development. All research and developmental activities are done by its Subsidiaries and Affiliates on a per project basis. The allocation for such activities may vary depending on the nature of the project.

(xiii) Costs and Effects of Compliance with Environmental Laws

AEV’s BUs are subject to extensive, evolving and increasingly stringent safety, health and environmental laws and regulations. These laws and regulations, such as the Clean Air Act (RA 8749), address, among other things, air emissions, wastewater discharges, the generation, handling, storage, transportation, treatment and disposal of toxic or hazardous chemicals, materials and waste, workplace conditions, and employee exposure to hazardous substances. The BUs have incurred and are expected to continuously incur operating costs to comply with the above laws and regulations. However, these costs and expenses cannot be segregated or itemized as these are embedded in, and are part and parcel of, the BUs overall system in compliance with both industry standards and the government’s regulatory requirements. Standard regulations that govern business operations other than the Clean Air Act are Ecological Solid Waste Management Act (RA 9003), Clean Water Act (RA 9275), Toxic Chemical Substances and Hazardous Waste Act (RA 6969), and Philippine Environmental Impact Statement System (Presidential Decree No. 1586). Designated pollution control officers in the different BUs closely monitor compliance with the requirements of these regulations. Under the Food Group, Pilmico and PANC merited a re-certification for ISO 9001:2008, Hazard Analysis and Critical Points Control (HACCP) and Good Manufacturing Practice (GMP). In addition to the standard regulations that govern the Food Group is also regulated by the Environmental Impact Statement System (PD 1586). With respect to the Land Group, AboitizLand complies with Presidential Decree 1586, the law establishing an Environmental Impact Statement (EIS) System. AboitizLand strives to attain a balance between its interests and environmental quality and protection. All AboitizLand projects, regardless of scale, comply with the requirements of the aforementioned law. AboitizLand’s developments, Kishanta subdivision in Talisay City and Pristina North in Bacayan, Cebu City, were included in all tours and seminars conducted by the Housing and Land Use Regulatory Board (HLURB) for government planners, developers, municipal and city officials of the region to showcase AboitizLand’s environmentally compliant developments. Davao Light is further regulated by the local government of Davao and is compliant with all required certifications. The company is exempted from RA 6969 since its waste oil is recovered and fed back to its engines, using the waste oil recovery system.

(xiv) Employees

As of March 27, 2015, AEV has a total of 243 employees composed of executives, managers, supervisors, rank and file and contractual employees. There is no existing collective bargaining agreement (CBA) covering AEV employees.


The following table provides a breakdown of total employee headcount per strategic Business Unit, divided by function, as of March 27, 2015:

Number of Employees

Business Unit

AEV UnionBank

and Subsidiaries

Pilmico and

Subsidiaries

AboitizLand and

Subsidiaries

AboitizPower And

Subsidiaries Executives 46 139 21 19 115 Managers 45 956 54 28 229 Supervisors 42 1,214 184 89 442 Rank & File 108 1,338 197 61 1,740 Contractual 2 31 34 38 474

TOTAL 243 3,678 490 235 3,000 Unionized Employees

N/A 1,254 21 N/A 607

Expiry of CBA N/A May 2015 May 31, 2015

N/A February 28, 2017 (APRI) June 15, 2016 (Davao Light) September 19, 2017 (Hedcor) December 31, 2016 (VECO) May 9, 2019 (SFELAPCO) June 30, 2014 – under negotiation (Cotabato Light)

(xiv) Major Risk/s Involved in the Business of AEV and its Significant Subsidiaries

An integral part of AEV’s enterprise risk management efforts is to understand and anticipate the risks that are crucial to the success of the businesses of AEV. AEV constantly strives to address the risks it may encounter in the businesses in which it is involved. Reputation Risk AEV recognizes that its reputation is its single most valuable asset. It is a competitive advantage that enables the Company to earn the trust of its stakeholders. The Company is cognizant of the fact that the reputation it has today took generations to strengthen and it is therefore something that the Company wants to protect, build and enhance continuously. Today’s world of higher corporate governance standards, coupled with the rise of civil society groups, social media and greater scrutiny from key stakeholders, has created a new environment where corporate reputation has become a differentiating asset as well as the number one risk. Managing AEV’s reputation requires understanding of its reputational terrain, which includes all its stakeholders - team members, shareholders, lenders, communities in which it operates, non-governmental organizations, regulators, advocacy groups, traditional media and social media, and the general public. AEV manages reputational risk, which could be the effect of the occurrence of another risk, through:


• building organizational capability through a formalized governance structure and intelligence process;

• assessing and mitigating risks; • identifying and engaging all stakeholders through information and education

campaigns; • implementing anticipatory issues management; • developing and implementing a Group-wide social media policy and strategy; • developing brand champions and brand advocates among its team members

through effective; corporate communication and engagement programs; • ensuring brand integrity by establishing reputation metrics; and • integrating sustainable practices across the value chain to promote inclusive

growth.

In 2014, AEV engaged the services of an external research group to conduct a reputation survey for the Aboitiz Group to get a baseline reading of the stakeholders’ perception and insights, and to determine the Group’s reputation level. The survey revealed that the stakeholdershave a very positive perception of the Group’s overall reputation, with its Corporate Social Responsibility rated the most excellent among the seven reputational dimensions covered. Competition Risk AEV and its BUs operate in highly competitive environments. As such, failure to properly consider changes in their respective markets and predict the actions of competitors can greatly diminish competitive advantage. AEV. The AEV Business Development organization is strategically setup primarily to capture opportunities in the PPP program and in other sectors in which AEV believes it could further leverage on its core competencies, is scalable, and is deemed acceptable from both a risk and return perspective with strong recurring profits and cash flow. To manage the risks, strategic partnerships and alliances are explored and formed with technical experts and even local players where necessary. For the new projects and investments, a formal project risk management program is now established Group-wide. This will be enhanced further by the creation of an Investment Committee that established a structured framework for evaluating and ensuring that AEV and its BUs pursue the right opportunities. Power. Locally, AboitizPower will be facing pivotal changes in the power industry in the next few years. AboitizPower’s investments in Greenfield and Brownfield projects, as well as its competitors’ investments are starting to pour in, with new players coming into the game. The power industry is now moving into a situation where there will be adequate or even, as some fear, an oversupply of electricity across all grids in the coming years. To mitigate the risks, projected capacities from Greenfield and Brownfield projects are contracted ahead of commercial operations to ensure that plant operations are optimized and to protect revenue and cash flow streams. Food. Tariff rates for the imported flour, feeds and meat have been reduced or eliminated due to the free trade agreements signed by the Philippines and other countries, as well as the ASEAN integration – where member countries in the region would be trading at zero tariffs. To manage, the Food Group is looking at expanding its capacities in the flour, feeds and farms businesses locally. In preparation for the ASEAN integration the Food Group’s


strategy in 2015 is to export flour in the ASEAN region and to expand the aqua feed mill company purchased in Vietnam. The Food Group will also continue to explore and pursue other opportunities in the ASEAN region through mergers and acquisitions. Land Group. Amidst the current intense competition across all sectors of the real estate market, the Philippine real estate industry is expected to grow further next year with the country’s sustained economic growth as well as the upcoming ASEAN integration. AboitizLand, has always been a niche player focusing on products where it can offer unique value. To remain competitive, AboitizLand will continue to grow its Cebu footprint by offering differentiated services and innovative products. AboitizLand will accelerate growth in the mid-market segment and maintain its dominant leadership in the high-end market. Nationally, AboitizLand plans to make its first residential investments by entering Luzon’s mid- and low-mid markets, where demand is anticpated to be strong. For its commercial and industrial divisions, AboitizLand plans maintain its momentum and sustain its growth track, with the expansion phase of The Outlets. AboitizLand plans to continue to grow Lima Land as part of its drive to build up its industrial portfolio nationwide. Banking. The Philippines has relaxed the rules governing foreign bank ownership, making a big step to bring in more foreign direct investments, as well as preparing for further integration with other countries in the ASEAN. ASEAN integration means will result to changes in the local landscape of Philippines banking industry. There is imminent need to supplement organic growth through new products and channels, with possible local or regional mergers or acquisitions. In response to these changes, UnionBank focuses its resources into building larger retail accrual businesses, primarily the teachers’ loan business of CitySavings. UnionBank continues to build its retail accrual businesses with focus on credit cards, mortgage, salary loans, increasing fee-based transactions from the aforesaid businesses, and debit cards and cash management businesses. Following the successful nationwide roll-out of its “Simply the Best” program to delight and engage customers at the branch level, CitySavings continues its expansion plans of bringing the total branch network to 100 branches and creating capacity to take advantage of existing and emerging opportunities in the civil servant market segment. Regulatory Risk

The complexity of the business and regulatory landscape is increasing dramatically. Several of AEV’s BUs, particularly in the power and banking sectors, are now being subject to more stringent regulations. Corporations in the Philippines are navigating through new and more stringent regulatory requirements with relatively higher stakeholder expectations oftentimes expressed through a public sentiment. They are challenged to comply with regulations in ways that support performance objectives, protect their brands, and sustain their corporate values. To respond proactively to potential fundamental changes that have an impact on its businesses, AboitizPower has a dedicated regulatory team that works closely with the Generation Companies and Distribution Utilities, in maintaining good working relations with the DOE and other government regulatory agencies. This includes actively


participating in the consultative processes that lead to the development of rules and regulatory policies covering the power industry. The regulatory team has also developed a strategy anchored on a long term perspective in anticipation of a possible new or change in existing regulations. For UnionBank and its Subsidiaries engaged in banking, compliance programs have been implemented and designed to ensure adherence not only to current and applicable laws and regulations, but also to UnionBank’s internal policies, industry-accepted standards, and corporate governance best practices and principles.

Business Interruption Due to Natural Calamities and Critical Equipment Breakdown Loss of critical functions and equipment caused by natural calamities such as earthquakes, windstorms, typhoons and floods could result in a significant interruption of the businesses within the Aboitiz Group. Business interruption may also be caused by other factors such as major equipment failures, software, network, and applications failures, fires and explosions, hazardous waste spills, workplace fatalities, product tampering, terrorism and other serious risks. Regular preventive maintenance of the facilities and technological infrastructure and systems of the Aboitiz Group is being strictly observed, and loss prevention controls are continually being evaluated and strengthened. In 2015, as part of the Asset Management Program for the Generation Companies, maintenance, inspection data, and repair histories will be automated with the Maximo system going live. Group insurance facilities that leverages on the Aboitiz Group’s portfolio of assets, supported by risk modelling and quantification, are in place. Business interruption insurance has also been procured to cover the potential loss in gross profits in the event of a major damage to the Aboitiz Group’s critical facilities and assets. This has resulted to AEV having the best fit insurance solutions as it continue efforts to achieving the optimal balance between retaining and transferring risks and lower the Total Cost of Insurable Risk (TCOIR). To ensure the continuity of operations in the event of a business interruption, AEV and its BUs have completed the development of business continuity plans and have tested majority of these plans in 2014. As part of continuous improvement, these plans will be reviewed, tested and enhanced. New business continuity scenarios will also be developed to stay abreast with the changing risks and issues AEV and its BUs face.

Financial Risks In the course of the operation of AEV and its BUs, the Company is exposed to financial risks, namely:

a. interest rate risk resulting from movements in interest rates that may have

an impact on outstanding long-term debt; b. credit risk involving possible exposure to counter-party default on its cash

and cash equivalents; c. liquidity risk in terms of the proper matching of the type of financing

required for specific investments; and d. foreign exchange risk in terms of foreign exchange fluctuations that may

significantly affect its foreign currency denominated placements and borrowings.


Commodity Price Risk AEV BUs engaged in food and powerhave raw material and fuel requirements that are subject to price, freight and foreign exchange volatility factors. Fluctuation in any of these volatile elements, individually or combined, will result to increases in the operating costs of these BUs. To address these exposures, the BUs’ respective management teams have taken a more active role in understanding the markets, including entering into contracts and hedge positions with the different suppliers of commodities. In 2015, a Financial Risk Management framework which includes commodity risks will be developed to help improve existing capabilities in managing and reducing uncertainty relating to certain commodities. The Power Group has also undertaken a deliberate shift to capacity-based contracts for the bulk of its PSAs. Such contracts come with a provision for the full pass-through of fuel costs for the energy generated by the Business Units.

Project Risk AEV is looking at major investment opportunities and projects in power generation, power distribution, food, infrastructure, renewable fuels, and real estate sectors. Given the variance in the scale and complexity of these projects, there are inherent risks and issues, such as project completion and execution within budget and timelines. In order to manage these risks, the Company makes the effort to select the right partners, engage reputable contractors and third party suppliers, obtain insurance, and implement a project risk management framework, which includes identifying, assessing and managing risks at various stages of the project lifecycle – pre-development, development and during execution. A regular review of the project risk management plans is also being performed to monitor implementation of risk control measures. Cyber Risks The business benefits offered to organisations by technologies like cloud computing, mobile devices, social media and internet introduce a range of new risks as well as causing existing risks to evolve. Together with the threats of hacking, malware, phishing and other forms of attacks, this makes cyber risks one of the key risks that the Groups needs to be monitoring. While sound security measures are in place, including an information security management system for AEV and most of the BUs, an enhanced social media policy, among other key IT security controls, further understanding and analysis of the key vulnerabilities and exposures brought about by cyber risks need to be pursued. In 2015, minimum guidelines and requirements for information security will be developed for implementation across the Aboitiz Group. This will be complemented by a Cyber Risk Framework and process, an enhanced Mobile Device Management initiative and development of business continuity plans for key cyber risk scenarios.


(b) Requirements as to Certain Issues or Issuers

(i) Debt Issues

(a) On November 23, 2010, AEV signed a Notes Facility Agreement with a consortium of primary institutional lenders for the issuance of peso-denominated corporate fixed rate notes (Notes) in the principal aggregate amount of up to P1.5 bn through a private placement to not more than 19 institutional investors, pursuant to SRC Rule 9.2(2)(B). BPI Capital Corporation and the Bank of the Philippine Islands–Asset Management and Trust Group (BPI-AMTG) acted as the Arranger and Notes Facility Agent, respectively. The proceeds of the Notes were used for refinancing and for general corporate use of AEV.

The following are the details of the corporate notes held by institutional investors as of December 31, 2014:

(b) On August 24, 2014, the Board of Directors of AEV approved the sale of a part of the Company’s common shares held in treasury, equivalent to up to Fifty Million (50,000,000) treasury shares. The shares will be sold, either in tranches, or in a single block at prevailing market prices through the facilities of the PSE. The Board of Directors delegated the authority to management to determine the timing of the sale of the treasury shares.

The proceeds of the sale will be used to build up the Company’s cash reserves, working capital and for other general corporate purposes. As of March 31, 2015, AEV has sold a total of 21,794,986 treasury shares, broken down as follows:

The resulting capital structure as of March 31, 2015 is as follows:

Number of Issued Common Shares : 5,694,599,621 Treasury Shares : 150,932,814 Net of Issued and Outstanding Common Shares : 5,543,666807

(c) On September 26, 2013, the Board of Directors of AEV approved the issuance of up to

the aggregate amount of π10 bn in retail bonds with tenors of seven and ten years (the “Bonds”). First Metro Investment Corporation (FMIC) was appointed as Issue Manager and Lead Underwriter for the issuance of the Bonds. AEV also appointed Metropolitan Bank and Trust Company (MBTC) – Trust Banking Group as the Trustee, China Banking Corporation as Co-Manager and Philippine Depository & Trust Corporation (PDTC) as the registry and paying agent for the transaction. The Bonds received the highest possible rating of PRS “Aaa” from the Philippine Rating Services Corporation.

NOTEHOLDERS AMOUNT DUE

Bank of the Philippine Islands P495,000,000.00 BPI AMTG as Investment Manager for ALFM Peso Bond 693,000,000.00

TOTAL P1,191,000,000.00

Transaction Date Number of Treasury Shares Sold

August 29, 2014 10,757,256

September 2, 2014 5,952,230

January 20, 2015 5,085,500

Total Treasury Shares Sold 21,794,986


SEC issued the Order of Registration and a Certificate of Permit to Sell Securities on November 11, 2013. The Bonds were offered to the public on the same day until November 15, 2013. The Bonds were issued in two series, the seven-year bonds with a fixed interest rate of 4.4125% per annum, and the ten-year bonds with a fixed interest rate of 4.6188% per annum. Interest rate will be paid quarterly in arrears starting February 21, 2014 for the first interest payment date, and May 21, August 21, November 21 and February 21 of each year for each subsequent interest payment date at which the bonds are outstanding. Of the aggregate amount of π10 bn, π8 bn were subsequently listed with the PDEx on November 21, 2013. The Company has the option, but not the obligation, to redeem in whole any series of the outstanding Bonds, on the following dates or the immediately succeeding banking day if such date is not a banking day: (i) for the seven-year bonds – on the fifth year and one quarter and on the sixth year from the issue date; and (ii) for the ten-year bonds – on the seventh year, on the eight year and on the ninth year from the issue date. AEV has been paying interests to its bond holders since February 21, 2014.

Use of Proceeds

Following the offer and sale of the Bonds, AEV received the aggregate amount of P8 bn as proceeds from the said debt raising exercise. Below is the summary of the projected usage of the proceeds of the bond issuance as reported in AEV’s prospectus compared with its actual usage as of December 31, 2014.

Projected Usage (Per Prospectus)

(in Pesos)

Actual Usage (in Pesos)

Unused Proceeds (in Pesos)

AboitizLand - JV with Ayala Land, Inc. P1,499,600,000.00 P1,350,000,000.00 P149,600,000.00 AboitizLand - Additional landbank purchases

500,000,000.00 590,000,000.00 (90,000,000.00)

AboitizLand -Purchase of Lima Land Shares 1,545,500,000.00 1,546,000,000.00 (500,000.00)

AboitizLand -Purchase of Lima Land Shares - 985,000,000.00 (985,000,000.00)

Sub-total 3,545,100,000.00 4,471,000,000.00 (925,900,000.00)

Payment of Existing Short-term Debt to Finance:

Capital Infusion into AEV Aviation 500,000,000.00 500,000,000.00 - Purchase of UnionBank shares in 2012 1,030,000,000.00 1,030,000,000.00 - Purchase of UnionBank shares in 2013 1,768,000,000.00 1,768,000,000.00 -

Sub-total 3,298,000,000.00 3,298,000,000.00 - Aseagas - Liquid Bio Methane Project 622,437,041.00 295,472,520.00 326,964,521.00 Bond Issuance Costs 79,603,125.00 86,113,658.00 (6,510,533.00) Warchest 454,859,834.00 - 454,859,834.00

TOTAL P8,000,000,000.00 P8,150,586,178.00 (P150,586,178.00)


Item 2. Properties

The office space occupied by AEV is leased from a third party. As a holding company, AEV does not utilize significant amounts of office space. On a consolidated basis, the property, plant and equipment of the Group were valued at P126.20 bn and P112.72 bn as of December 31, 2014 and 2013, respectively. Breakdown of these assets is as follows: Projected capital expenditures will be reflected in the relevant portion of the financial statements of the Company.

To participate in infrastructure biddings, projects and opportunities that become available to the Company, the Board of Directors have agreed to expand the current core businesses to include infrastructure. The Company is eyeing and intending to participate in infrastructure works under the PPP Program of the government and any other project that becomes available to the Group. Property, plant and equipment with carrying amount of π29.25 bn and π18.31 bn as of December 31, 2014 and 2013, respectively, are used to secure the Group's long-term debts. For further details refer to Note 19 (disclosure on Long-term Debts) of the attached AEV 2014 consolidated financial statements.

2014 2013

Power, Plant & Equipment P87,188,066 P84,097,522

Transmission & Distribution Equipment 12,753,079 14,034,818

Machinery & Equipment 4,807,224 4,577,172

Buildings, Warehouses and Improvements 5,869,677 5,298,210

Office Furniture, Fixtures and Equipment 2,446,038 3,445,489 Transportation Equipment 1,286,608 1,256,296

Land 1,749,671 1,549,874

Leasehold Improvements 1,338,371 1,355,551 Handling Equipment 246,092 246,092 Flight Equipment 1,010,290 997,521

Ships Under Refurbishment and Construction in Progress 33,784,751 21,554,513

Others 992,633 989,349

153,472,500 139,402,407

Less: Accumulated Depreciation and Amortization 27,268,776 26,680,500

TOTALS ππ126,203,724 P112,721,907 Note: Values for the above table are in thousand Philippine Pesos.


Locations of Principal Properties and Equipment of AEV Subsidiaries are as follows:

SUBSIDIARY DESCRIPTION LOCATION/ADDRESS CONDITION

Cotabato Light & Power Company

Industrial land, buildings/plants, equipment & machineries

Sinsuat Avenue, Cotabato City In use for operations

Davao Light & Power Company, Inc.


P. Reyes Street, Davao City; Bajada, Davao City In use for operations

Visayan Electric Company, Inc.


Jakosalem Street, Cebu City and J. Panis Street, Cebu City

In use for operations



Kiwalan Cove, Dalipuga, Iligan City In use for operations

Hedcor, Inc. Hydropower plants

Kivas, Banengneng, Benguet: Beckel, La Trinidad, Benguet: Bineng, La Trinidad, Benguet: Sal-angan, Ampucao, Itogon, Benguet: Bakun, Benguet


Hedcor Sibulan, Inc. Hydropower plant Santa Cruz, Sibulan, Davao del

Sur In use for operations

Cebu Private Power Corporation Bunker C thermal power plant Cebu City, Cebu In use for operations

AP Renewables, Inc. Geothermal power plants Tiwi, Albay; Caluan, Laguna and

Sto. Tomas, Batangas In use for operations

Therma Marine, Inc.

Barge-mounted diesel power plants

Nasipit, Agusan del Norte; Barangay San Roque, Maco, Compostela Valley


Pilmico Animal Nutrition Corporation

Industrial land, building/plant equipment & machineries

Barangay Sto. Domingo II, Capas, Tarlac In use for operations

Therma Mobile, Inc.

Barge-mounted diesel power plants Navotas Fishport, Manila In use for operations

Therma Visayas, Inc. Land Bato, Toledo, Cebu For plant site

Therma South, Inc. Land Davao City and Davao del Sur For plant site

Aboitiz Land, Inc. Raw land and improvements Metro Cebu, Balamban, Cordova, Mactan, Liloan, Samar, Misamis Oriental, Davao

Existing or undergoing development; for future use

Lima Land, Inc. Raw land and improvements Lipa and Malvar, Batangas Existing or undergoing development; for future use

Aseagas Corporation

Raw land and improvements Lian, Batangas Undergoing development


Item 3. Legal Proceedings

Material Pending Legal Proceedings

Bayan Muna Representative Neri Javier Colmenares, et. al. v Energy Regulatory Commission, et. al., G. R. No. 210245; National Association of Electricity Consumers for Reforms, et. al. v Manila Electric Company, et. al. G. R. No. 210255; Manila Electric Company, et. al. v Philippine Electricity Market Corporation, et. al., G. R. No. 210502

On December 19, 2013, Bayan Muna representatives filed a Petition for Certiorari against the ERC and the Manila Electric Company (MERALCO) with the Supreme Court, questioning the alleged substantial increase in MERALCO’s power rates for the billing period of November 2013. These cases raised, among others, the legality of Section 6, 29 and 45 of the EPIRA, the failure of ERC to protect consumers from the high energy prices and the perceived market collusion of the generation companies. These cases were consolidated by the Supreme Court, which issued a Temporary Restraining Order (TRO) preventing MERALCO from collecting the increase in power rates for the billing period of November 2013. The TRO was subsequently extended by the Supreme Court for another 60 days, or until April 22, 2014. MERALCO, in turn, filed a counter-petition impleading all generation companies supplying power to the WESM, to prevent the generation companies from collecting payments on power purchases by MERALCO from the WESM. The Supreme Court also ordered all power participants to file their respective pleadings in response to MERALCO’s counter-petition.

The Supreme Court set the consolidated cases for oral arguments last January 21, February 4 and 11, 2014. After hearing, all parties were ordered to file their comments and/or memoranda. The case is pending before the Supreme Court. MERALCO has been prevented from collecting the differential increase of the price hike. Because of MERALCO’s counter-petition against generators, all generation companies which supplied power through WESM were not paid by PEMC. On April 22, 2014, the Supreme Court extended the TRO indefinitely. The case is still pending with the Supreme Court. ERC Case No. 2014-021 MC: In the Matter of the Prices in the WESM for the Supply Months of November and December 2013 and the Exercise by the Commission of its Regulatory Powers to Intervene and Direct the Imposition of Regulated Prices therein without Prejudice to the On-going Investigation on the Allegation of Anti-Competitive Behavior and Possible Abuse of Market Power Committed by Some WESM Participants ERC was tasked to conduct an investigation on the allegations of anti-competitive behavior by some WESM participants. In relation to the investigation conducted, ERC, in its Order dated March 3, 2014 (the “ERC Order”), directed PEMC to void the Luzon WESM prices during the November and December 2013 supply months on the basis of a market failure and a preliminary investigation of alleged market collusion. ERC also declared the imposition of regulated prices for such billing periods and directed PEMC to calculate the regulated prices and implement the same in the revised No-vember and December 2013 WESM bills of the concerned distribution utilities in Luzon, except for MERALCO, whose November 2013 WESM bill was maintained in compliance with the TRO issued by the Supreme Court. ERC also ordered PEMC through its Enforcement and Compliance Office (ECO) to conduct an investigation, within a period of no less than 90 days, on alleged violation of the Must-Offer-Rule. On March 18, 2014, PEMC issued adjusted billing statements for all generators trading in the WESM, including Cebu-based EAUC and CPPC, recalculating the WESM prices. AboitizPower’s Affiliates and Subsdiaries, APRI, TLI, TMO, AESI, AdventEnergy, SN Aboitiz Power-Magat, SN-Aboitiz Power-Benguet, CPPC and EAUC filed their respective Motions for Reconsideration, questioning the validity of the ERC Order on the ground of lack of due process, among others. ERC in its Order dated October 15, 2014 denied said Motions for Reconsiderations. SN-Aboitiz Power-Benguet, SN Aboitiz Power-Magat, APRI,


TLI, TMO filed their Petitions for Review before the Court of Appeals on November 19, 24, December 1 and 4, 2014, respectively. These Petitions are currently pending with the Court of Appeals. PEMC ECO-2014-0009: Therma Mobile, Inc. (TMO Power Plants Units 1-4) Possible Non-Compliance with Must-Offer- Rule, Investigation Summary Report, dated August 4, 2014 PEMC ECO conducted an investigation on TMO for possible non-compliance with the Must-Offer-Rule for the period October 26, 2013 to December 25, 2013. PEMC ECO concluded that TMO was non-compliant with the Must-Offer-Rule for 3,578 intervals and recommended a penalty of P234.9 mn. TMO filed its Letter Request for Reconsideration on September 5, 2014, contending that it did not violate the Must-Offer-Rule because its maximum available capacity was limited to 100 MW due to: (i) the thermal limitations of the old TMO 115-kV transmission line, and (ii) the technical and mechanical constraints of the old generating units and the component engines of the TMO power plants which were under various stages of rehabilitation. In its letter dated January 30, 2015, the PEMC Board denied TMO’s request for reconsideration and confirmed its earlier findings of breach of 3,578 counts under the Must-Offer-Rule and sustained the imposition of financial penalties amounting to P234.9 mn on TMO. According to the PEMC Board, the penalties will be collected from TMO through the WESM settlement process. TMO maintains that there is no basis for the PEMC decision. It did not withhold any capacity for the period covered, as it was physically impossible for TMO to transmit more than 100 MW to MERALCO. Although TMO’s rated capacity is 234 MW (net), it could only safely and reliably deliver 100 MW during the November and December 2013 supply period because of limitations of its engines and the 115-kV transmission line. This temporary limitation of TMO’s plant was confirmed during a dependable capacity testing conducted on November 21, 2013. At this period, TMO’s engines and transmission lines were still undergoing rehabilitation after having been non-operational for the last five years. On February 13, 2015, TMO filed a Notice of Dispute with the PEMC to refer the matter to dispute resolution under the WESM Rules, WESM Dispute Resolution Market Manual (WESM DRMM) and the ERC-PEMC Protocol. On February 16, 2015, TMO filed an Urgent Petition for the Issuance of Interim Measures of Protection for the Issuance of a Writ of Preliminary Injunction with prayer for Temporary Order of Protection before the Pasig City Regional Trial Court (RTC). In its Order dated February 24, 2015, the RTC granted TMO a 20-day temporary order of protection and directed PEMC to a) refrain from demanding or collecting the amount of P234.9 mn as financial penalty; b) refrain from charging interest on the financial penalty and having the same accrue; and c) refrain from transmitting PEMC-ECO’s Investigation Report to the ERC. TMO posted a bond in the amount of P234.9 mn to answer for any damage that PEMC may suffer as a result of the Order. The hearing for TMO’s prayer for the issuance of a Writ of Preliminary Injunction was held last March 12 and 19, 2015. After considering the factual and legal circumstances, the RTC found TMO’s petition to be meritorious and issued a writ of preliminary injunction preventing PEMC, through the PEM Board, from: (a) demanding or collecting from TMO the amount of Php234.9 million in financial penalties; (b) charging interest on the financial penalties and having the same accrue; and (c) transmitting PEMC-ECO’s investigation report to the ERC, until the dispute is finally resolved through the dispute resolution process of the WESM Rules and WESM DRMM. In same order, the court made a prima facie determination of the existence of an arbitration agreement between TMO and PEMC, and ordered the parties to continue with the dispute resolution process embodied in the WESM Rules and WESM DRMM.


Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

PART II - OPERATIONAL AND FINANCIAL INFORMATION Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters

(1) Market Information

AEV’s common shares are traded in the Philippine Stock Exchange, Inc.

The high and low stock prices of AEV’s common shares for each quarter for the past two years and first quarter of 2015 were as follows:

2015 2014 2013

High Low High Low High Low

First Quarter 58.15 57.50 61.50 50.10 60.30 52.90

Second Quarter N/A N/A 59.00 54.20 58.40 40.00

Third Quarter N/A N/A 56.90 53.90 50.95 41.25

Fourth Quarter N/A N/A 53.80 48.90 55.00 45.70

The closing price of AEV common shares, as of March 31, 2015 is P58.00 per share.

(2) Holder

As of March 27, 2015, AEV has 9,439 stockholders of record, including PCD Nominee Corporation (Filipino) and PCD Nominee Corporation (Foreign). Common shares outstanding as of same date were 5,543,666,807 shares. The top 20 stockholders of AEV as of March 27, 2015 are as follows:

STOCKHOLDERS NATIONALITY NUMBER OF SHARES PERCENTAGE

1 Aboitiz & Company, Inc. Filipino 2,735,600,915 49.35%

2 PCD Nominee Corporation (Filipino) Filipino 576,392,975 10.40%

3 PCD Nominee Corporation (Foreign) Non-Filipino 566,272,831 10.21%

4 Ramon Aboitiz Foundation, Inc. Filipino 424,538,863 7.66%

5 Sanfil Management Corporation Filipino 120,790,211 2.18%

6 Chanton Management & Development Corporation Filipino 62,118,484 1.12%

7 Windemere Management & Development Corporation Filipino 49,666,352 0.90%

8 Donya 1 Management & Development Corporation Filipino 43,136,359 0.78%

9 Morefund Management & Development Corporation Filipino 40,000,000 0.72%

10 Anso Management Corporation Filipino 34,369,707 0.62%

11 Bauhinia Management Inc. Filipino 32,643,799 0.59%

12 Mario Ugarte Filipino 23,531,731 0.42%


STOCKHOLDERS NATIONALITY NUMBER OF SHARES PERCENTAGE

13 MYA Management & Development Corporation Filipino 22,494,414 0.41%

14 Parraz Development Corporation Filipino 22,380,003 0.40%

15 Les Folatieres Holdings, Inc. Filipino 20,779,308 0.37%

16 Luis Miguel O. Aboitiz Filipino 20,092,133 0.36%

17 Guada Valley Holdings Corporation Filipino 17,688,445 0.32%

18 M.M.M. Holdings, Inc. Filipino 15,000,000 0.27%

19 Ma. Cristina; Jaime Jose Aboitiz; Luis Alfonso Aboitiz Filipino 13,605,767 0.25%

20 Annabelle O. Aboitiz Filipino 12,275,834 0.22%

SUB-TOTAL 4,853,378,131 87.55%

Other Stockholders 690,288,676 12.45%

TOTAL SHARES 5,543,666,807 100.00%

NET ISSUED AND OUTSTANDING SHARES 5,543,666,807 100.00%

(3) Dividends

The cash dividends declared by AEV to common stockholders from fiscal year 2013 to the first quarter of 2015 are shown in the table below:

In a special meeting held on January 11, 2007, the AEV Board of Directors approved the policy of distributing at least one-third of its previous year’s earnings as cash dividends to its stockholders for subsequent years.

(4) Recent Sales of Unregistered or Exempt Securities, Including Recent Issuance of Securities

Constituting an Exempt Transaction AEV does not have any recent sales of unregistered or exempt securities including recent

issuances of securities constituting an exempt transaction.

Item 6. Management’s Discussion and Analysis or Plan of Action

Year Ended December 31, 2014 vs. Year Ended December 31, 2013

The following discussion and analysis of the financial condition and results of operations of Aboitiz Equity Ventures, Inc. (“AEV” or the “Company” or the “Parent Company”) and its subsidiaries should be read in conjunction with the audited consolidated financial statements and accompanying disclosures set forth elsewhere in this report.

Year Cash

Dividend Per Share

Total Declared Record Date

2015 (regular) P1.11 π6.15 bn 03/24/2015 2014 (regular) P1.27 P7.01 bn 03/25/2014 2014 (special) P0.53 P2.93 bn 03/25/2014 2013 (regular) P1.44 P7.95 bn 03/19/2013 2013 (special) P0.56 P3.09 bn 03/19/2013


TOP FIVE KEY PERFORMANCE INDICATORS Management uses the following indicators to evaluate the performance of the registrant and its subsidiaries: 1. EQUITY IN NET EARNINGS OF INVESTEES

Equity in net earnings (losses) of investees represents the group’s share in the undistributed earnings or losses of its associates for each reporting period subsequent to acquisition of said investment, net of goodwill impairment cost, if any. Goodwill is the difference between the purchase price of an investment and the investor’s share in the value of the net identifiable assets of investee at the date of acquisition. Equity in net earnings (losses) of investees indicates profitability of the investments and investees’ contribution to the Group’s consolidated net income. Manner of Computation: Investee’s Net Income (Loss) x Investor’s % ownership – Goodwill Impairment Cost.

2. EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION & AMORTIZATION (EBITDA)

The Company computes EBITDA as earnings before extra-ordinary items, net finance expense, income tax provision, depreciation and amortization. It provides management and investors with a tool for determining the ability of the group to generate cash from operations to cover financial charges and income taxes. It is also a measure to evaluate the group’s ability to service its debts and to finance its capital expenditure and working capital requirements.

3. CASH FLOW GENERATED

Using the Statement of Cash Flows, management determines the sources and usage of funds for the period and analyzes how the group manages its profit and uses its internal and external sources of capital. This aids management in identifying the impact on cash flow when the group’s activities are in a state of growth or decline, and in evaluating management’s efforts to control the impact.

4. CURRENT RATIO

Current ratio is a measurement of liquidity, calculated by dividing total current assets by total current liabilities. It is an indicator of the group’s short-term debt paying ability. The higher the ratio, the more liquid the group.

5. DEBT-TO-EQUITY RATIO

Debt-to-Equity ratio gives an indication of how leveraged the group is. It compares assets provided by creditors to assets provided by shareholders. It is determined by dividing total debt by stockholders’ equity.

KEY PERFORMANCE INDICATORS (KPI) (Amounts in thousands except financial ratio data)

JAN-DEC 2014 JAN-DEC 2013

EQUITY IN NET EARNINGS OF INVESTEES 7,244,241 10,596,577 EBITDA 38,355,609 36,492,444 CASH FLOW GENERATED:

Net cash flows from operating activities 27,104,460 25,343,680


Net cash flows used in investing activities (14,423,246) (12,645,557) Net cash flows from (used) in financing activities 1,663,025 (10,352,608) Net Increase in Cash & Cash equivalents 14,344,329 2,345,515 Cash & Cash Equivalents, Beginning 36,118,190 33,730,531 Cash & Cash Equivalents, End 50,481,566 36,118,190

DEC. 31, 2014 DEC. 31, 2013 CURRENT RATIO 2.76 2.64 DEBT-TO-EQUITY RATIO 1.08 1.02

DISCUSSION ON KEY PERFORMANCE INDICATORS: All the KPI values were within management’s expectation during the period in review. Management teams of the different businesses continued to effectively handle their respective operations and financial requirements. As a result, profitability had been sustained and financial position remained strong and liquid. Associates continued to generate substantial earnings and enhance the consolidated bottomline, despite the 32% decline in their income contribution to the Group. Consolidated EBITDA, which increased by 5%, translated into additional cash inflows coming from subsidiaries’ operations and from dividend payments of associates. The internally-generated funds were then used to finance capital expenditures, settle maturing financial obligations and pay cash dividends. With higher borrowings at the end of December 2014, debt-to-equity ratio edged up to 1.08x (versus end-2013’s 1.02x). Meanwhile, current ratio improved to 2.76x (versus end-2013’s 2.64x) as increase in current assets outpaced the increase in current liabilities.

Review of Jan-Dec 2014 Operations versus Jan-Dec 2013 Results of Operations For the year ended December 2014, AEV and its subsidiaries posted a consolidated net income of P18.38 billion (bn), a 13% YoY decrease. This translates to an earnings per share of P3.32 for the year in review. In terms of income contribution, power group still accounted for the bulk at 71%, followed by the banking, food and real estate groups at 18%, 7% and 4%, respectively. The Group generated a non-recurring net gain of P436 million (mn) (versus P22 mn in 2013) mainly from the P634 mn gain generated from the sale of AEV’s investments in Abojeb Group and in Cebu International Container Terminal, Inc. (CICTI), a non-operating associate. This was partly offset by P113 mn foreign exchange loss on the revaluation of dollar-denominated loans and placements, and P89 million transaction costs on sale of Lima Utilities Corporation, now Lima Enerzone Corporation (Lima Enerzone or LEZ) to AP. Stripping out these one-off items, the Group’s core net income for the current period amounted to P17.94 bn, down 15% YoY. Business Segments The individual performance of the major business segments is discussed as follows: Power Aboitiz Power Corporation (AP or AboitizPower) ended the year with an income contribution of P12.75 bn, a 10% decrease from last year’s P14.20 bn. AP’s generation group reported an 11% YoY drop in earnings contribution to AEV, from P11.7 bn to P10.4 bn, substantially attributed to the full year impact of the implementation of the Geothermal Resource Supply Contract (GRSC) for the Tiwi- MakBan plants, lower equity earnings from SN Aboitiz


Power-Magat, Inc. (SNAP-Magat or SN Aboitiz Power-Magat) owing to the limited operations of its hydro plant due to low water levels, and higher income tax provisions resulting from the expiry of Pagbilao and Magat plants’ income tax holiday during the year. The large hydros were also adversely affected by lower average prices for both its spot and ancillary rates. Generation group’s attributable net generation for the year in review grew by 3% YoY, from 10,949 gigawatt hours (GWh) to 11,272 GWh, due to the 7% YoY growth in power sales through bilateral contracts. Attributable sales on a capacity basis increased by 13% YoY to 1,800 MW. The growth was partly driven by Therma Mobile, Inc., which was able to offer its full capacity of 200 MW in the second quarter of 2014. Increase in water levels in the second half of 2014 as a result of typhoons led to a strong recovery in ancillary sales during this period. On the other hand, spot market sales decreased by 16% from 1,914 GWh to 1,612 GWh as low water levels constrained the operations of Magat, Ambuklao and Binga plants. Meanwhile, AP’s distribution group’s earnings contribution to AEV remained flat at P2.5 bn. Driven by the 15% growth in industrial sales and the incremental increase contributed by the newly-acquired Lima Enerzone, attributable electricity sales rose by 10% to 4,480 GWh from 4,076 GWh a year ago. This improvement though was tempered by higher costs incurred by Davao Light and Power Company, Inc. and Cotabato Light & Power Company due to the running of their embedded plants to cover for the shortfall in the Mindanao grid during the year. Banking Income contribution from this industry group fell 21%, from P4.11 bn to P3.24 bn for the year in review. Union Bank of the Philippines (UnionBank or UBP)'s full-year net income for 2014 was lower at P6.84 bn (vs P9.03 bn in 2013) mainly due to the 35% drop in total other income to P8.16 bn largely in view of exceptionally hefty trading gains posted during the previous year. This decline was partially countered by the 20% growth to P10.64 bn in net interest income, anchored on the robust expansion in earning assets coupled with the continuous reduction in average costs of interest-bearing liabilities, and the 34% jump to P3.27 bn in service charges, fees and commission as a result of the strong expansion in retail loans. Food Income contribution from Pilmico Foods Corporation (PFC or Pilmico) and its subsidiaries amounted to P1.31 bn, up 4% YoY, mainly attributed to the strong performance of Farms division with its net income doubling to P377 mn from P188 mn last year. On the other hand, the Flour division posted weak performance due to higher wheat cost and other manufacturing expenses. Moreover, the impact of the expiration of the income tax holiday (ITH) of the Iligan Feedmill also dragged the Feeds division’s earnings. Real Estate Full-year income contribution of Aboitiz Land, Inc. amounted to P633 mn, 132% higher than P273 mn last year. Revenues reached the P3.0 bn mark, 86% higher than last year. Industrial revenues were up by 161% YoY mainly due to the fresh revenue contribution of Lima Land, Inc. (Lima Land), which was fully acquired in February 2014. Residential segment revenues likewise grew by 31% as construction of its projects were now in full swing. Commercial revenues also registered a 123% growth primarily due to The Outlets in Mactan, Cebu which achieved 100% occupancy within its first year of operations.


Material Changes in Line Items of Registrant's Statements of Income and of Comprehensive Income For the year ended December 30, 2014, consolidated net income allocable to the equity holders of AEV registered a 13% decline, reaching P18.38 bn from P21.03 bn posted in the previous year. Operating profit for the current year amounted to P24.55 bn, a 16% increase YoY, as the P18.99 bn increase in revenues surpassed the P15.67 bn rise in costs and expenses. This increase was mainly attributed to the performance of power and real estate groups and the full contribution of Visayan Electric and Company, Inc. (VECO) which was consolidated towards the end of the second quarter of 2013. Power subsidiaries reported a 15% YoY increase in operating profit from P19.48 bn to P22.35 bn mainly due to the following: a.) full consolidation in 2014 of VECO’s positive margins which substantially accounted for the P1.09 bn increase; b.) P4.34 bn profit growth of the Therma Power, Inc.’s subsidiaries attributed to lower fuel and purchased power costs of Therma Luzon, Inc. (TLI), better selling prices of Therma Marine, Inc., and the fresh contribution from the rehabilitated barges of Therma Mobile, Inc.; c.) P207 mn fresh contribution of profits from RES group and LEZ. Said increase was offset by the P2.80 bn plunge in margins of renewable power group mainly attributed to AP Renewables, Inc. (APRI)'s higher fuel cost resulting from the full effect of the implementation of the GRSC for its Tiwi-MakBan plants. Real estate group also reported an increase in operating income by 174% (P1.03 bn vs P377 mn) largely from the fresh gross profit contribution of its newly-acquired subsidiary, Lima Land. Food group however, showed a slight 1% dip in operating profit (P1.77 bn vs P1.79 bn) resulting from weaker Flour margins offset by better performance of the Farms division.

Share in net earnings of associates dropped by 32% YoY (P7.24 bn vs P10.60 bn in 2013) due to the decline in income contributions of UBP and power associates, and the consolidation of VECO whose income contribution was reported as equity earnings for the first half of 2013. The decrease in UBP’s earnings was attributed to lower trading gains. For the power associates, the dip in net income resulted from the decrease in ancillary service revenue of SNAP-Magat at the back of low water levels, and STEAG State Power, Inc.’s unscheduled plant shutdown starting end of February until May, 2014. The drop in equity earnings, coupled with the increase in income tax provision more than offset the increase in operating profit and other income, and as a result, pulled down the Group’s over all profitability. Net interest expense increased by 16% to P6.11 bn due to higher average net debt level during the year in review. Other income rose by 252% YoY (P1.91 bn vs P541 mn in 2013) mainly due to lower foreign exchange (FX) loss (P199 mn vs P1.99 bn in 2013), resulting from the restatement of the dollar-denominated debt and placements of the power group. Said increase was countered by the lower gains amounting to P634 mn generated from the sale of Abojeb and CICTI versus the P1.3 bn gain reported in the same period last year from the sale of City Savings Bank, Inc. (CSB) shares, and the transaction cost of P89 mn incurred in the acquisition of LEZ by AP during the current period. The 354% increase in provision for income tax (P4.03 bn vs P887 mn in 2013) was mainly due to the expiry of TLI’s ITH at the end of 2013. Net income attributable to non-controlling interests remained at P5.18 bn. AEV’s consolidated comprehensive income attributable to equity holders increased by 20%, from P16.98 bn in 2013 to P20.35 bn in 2014. This was mainly due to the recognition of P1.91 bn AEV’s share of the unrealized fair valuation gains on the AFS investments of its banking associate, versus the P4.25 bn loss recorded in 2013. Said improvement in other comprehensive income was partly offset by the P2.65 bn decline in consolidated net income.


Changes in Registrant's Resources, Liabilities and Shareholders' Equity Assets Compared to year-end 2013 level, consolidated assets increased 14% to P281 bn as of December 30, 2014, due to the following:

a. Cash & Cash Equivalents increased by 40% (P50.48 bn vs P36.12 bn as of December 31, 2013) mainly due to the excess cash by AP and AEV parent companies generated from AP’s retail bond issuance in September 2014 and AEV’s sale of treasury shares in the third quarter of 2014, and majority of the subsidiaries’ excess internally-generated funds.

b. Derivative Assets (current and non-current) increased by 264% (P113 mn vs P31 mn

as of December 31, 2013) mainly due to unrealized mark-to-market gains recognized on outstanding hedging instruments during the current period.

c. Investments in and Advances to Associates increased by P4.36 bn (P52.28 bn vs

P47.91 bn as of December 31, 2013) mainly due to the following: 1.) P1.5 bn capital infusion in Cebu District Property Enterprise Inc., b.) recording of the P7.24 bn share in earnings of associates, and c.) recognition of P1.91 bn share of a banking associate’s fair valuation gains on its AFS investments. This increase was partially reduced by the P5.76 bn cash dividends received from associates and P249 mn sale of CICTI during the current period.

d. Gross of depreciation expense, the resulting P18.47 bn combined growth in

Property Plant and Equipment (PPE), Investment Properties (IP), and Land and Improvements (LI) was mainly due to the following: 1.) P13.13 bn on-going construction of Davao, Pagbilao 3 and Cebu coal plants and Tudaya and Sabangan hydro power plants; 2.) P665 mn on-going construction of Aseagas Corporation (Aseagas) biomass plant; 3.) P462 mn ongoing construction of new swine farms and other food group capital expenditures; 4.) P174 mn PPE of Vinh Hoan, a newly acquired subsidiary; 5.) P457 mn purchase of additional land for future development by the real estate group; and 6.) P3.55 bn various capex of the power group.

e. Pension Asset increased by 34% (P134 mn vs P100 mn in December 2013)

substantially due to the retirement contributions made by the Group during the year, reduced by benefits paid to retiring employees.

f. Goodwill increased by 16% (P1.55 bn vs P1.33 bn as of December 31, 2013) due to

the positive goodwill amounting to P394 mn generated from the acquisition of Vinh Hoan shares. This was partly offset by the reduction of the P179 mn provisional goodwill on VECO investment upon finalization of the fair value exercise related to the step acquisition made in 2013.

g. Other Noncurrent Assets (ONCA) increased by 36% (P11.38 bn vs P8.37 bn as of

December 31, 2013) primarily due to the build-up of deferred input VAT by the power group arising from the ongoing construction of its power plants.

The above increases were tempered by the following decreases:

a. Inventories decreased by 12% (P7.66 bn vs P8.76 bn as of December 31, 2013) mainly due to lower inventory levels carried by power and food groups.


b. Intangible Asset-Service Concession Rights decreased by 7% (P3.40 bn vs P3.66 bn in December 2013) mainly due to the amortization charged to consolidated net income during the period.

c. Deferred Income Tax Assets (DTA) decreased by 43% (P350 mn vs P610 mn in

December 2013) mainly due to the following: 1.) P581 mn reversal in 2014 of the deferred tax benefit on Net Operating Loss Carry Over (NOLCO) that was set up in December 2013, resulting from the application of this NOLCO against the generated taxable income in 2014; and 2.) P83 mn combined reversal in 2014 of deferred tax benefits on impairment provisions and unamortized contributions for past service, resulting from the actual write-off of certain accounts and claiming a portion of the unamortized past service contribution as a tax-deductible expense, respectively.

The above decrease was partly offset by the P397 mn reclassification of deferred tax liability on accumulated FX gain from DTA to Deferred Income Tax Liability (DTL). Said reclassification was done to reflect the shift of the concerned group’s position from net DTA in December 2013 to net DTL in December 2014.

Liabilities Consolidated short-term bank loans increased by 85% (P7.34 bn vs P3.96 bn in December 2013) while long-term liabilities increased by 22% (P111.44 bn vs P91.67 bn as of December 31, 2013). The increase in short-term loans was mainly due to availment by the Food and Real Estate Groups for working capital requirements. The P19.77 bn rise in long-term debt was substantially due to the P10 bn retail bond issuance by AP, P10.43 bn additional loan availment by Therma South, Inc. to finance ongoing coal plant construction, and P995 mn availment for Aseagas plant construction. Said increase was partly offset by the P1.60 bn principal amortization payments on long-term loans and finance lease obligation. Trade and other payables, inclusive of noncurrent portion, were lower by 16%, from P18.96 bn to P15.98 bn, mainly due to the P2.37 bn net settlement by power subsidiaries of their trade payables and the deconsolidation of Abojeb’s P250 mn payable accounts. Income tax payable increased by 56%, from P444 mn to P695 bn due to recording of additional income tax liability for the current period mainly as a result of the expiry of TLI’s ITH in December 2013. Derivative liabilities decreased by 100% from P23 thousand to nil due to the mark-to-market gains recognized by a power subsidiary on its interest rate swap contract. Customers deposits increased by 10%, from P5.42 bn to P5.94 bn mainly due to the growth in the customer base of power distribution subsidiaries. Asset retirement obligation (ARO) increased by 17% from P2.01 bn to P2.35 bn due to accretion of the liability resulting from the passage of time. Pension liability decreased by 22%, from P705 mn to P550 mn mainly on account of retirement contributions made by certain subsidiaries during the current year and the deconsolidation of Abojeb’s P70 mn account. Deferred income tax liabilities (DTLs) rose by 28%, from P1.37 bn to P1.76 bn, mainly due to the reclassification of P397 mn DTL on accumulated FX gain from DTA in 2013 to DTL in 2014. Equity Equity attributable to equity holders of the parent increased by 11% from year-end 2013 level of P96.93 bn to P107.94 bn, mainly due to the following: a.) P8.44 bn increase in Retained Earnings


resulting from the P18.38 bn net income recorded during the year, reduced by the P9.94 bn cash dividends paid; b.) P917 mn sale of treasury shares; and c.) P1.91 bn share in a banking associate’s unrealized mark-to market gains on its AFS investments. This was partially countered by the P314 mn acquisition of non-controlling interest generated from the purchase of the remaining 40% share in Lima Land and the acquisition of LEZ by AP. Material Changes in Liquidity and Cash Reserves of Registrant For the year ended December 2014, the Group continued to support its liquidity mainly from cash generated from operations, additional loans availed and dividends received from associates. Compared to the cash inflow in 2013, consolidated cash generated from operating activities in 2014 increased by P1.76 bn to P27.10 bn, mainly due to the growth in earnings before interest, depreciation and amortization (EBIDA) recorded by subsidiaries during the current year despite higher income taxes paid and settlement of trade payables. The current period ended up with P14.42 bn net cash used in investing activities versus P12.65 bn last year. This was mainly due to higher funds spent on the ongoing plant constructions, investment in an associate and a subsidiary, and a step acquisition of a subsidiary. On disposal of investments, cash generated from the sale of CSB last year was more, vis-a-vis the sale of CICTI and Abojeb during the period in review. Net cash from financing activities was at P1.66 bn, versus P10.35 bn used in 2013. This was attributed to the higher net debt availment of the Group and lower cash dividend payment by the registrant during the current period as compared with last year. For the period in review, net cash inflows surpassed cash outflows, resulting in a 40% increase in cash and cash equivalents, from P36.12 bn as of year-end 2013 to P50.48 bn as of December 30, 2014. Financial Ratios Backed by strong operating cash inflows, liquidity was adequately preserved. Current ratio stood at 2.76x, from 2.64x at the start of the year, since current assets grew stronger than current liabilities. Both debt-to-equity and net debt-to-equity ratios climbed slightly to 1.08:1 (versus year-end 2013’s 1.02:1) and 0.50x (versus year-end 2013’s 0.48x), respectively. This was mainly due to the growth in total liabilities outpacing the increase in equity. Outlook for the Upcoming Year/Known Trends, Events, Uncertainties which may have Material Impact on Registrant The Philippines’ strong GDP growth, the roll-out of the government’s Public-Private Partnership (PPP) Program, as well as the robustness and liquidity of the country’s financial system, provides AEV and its business units opportunities to sustain growth over the long-term. To complement the business units’ various initiatives, AEV also formed the AEV Business Development Team, whose key objectives are to scan the market for opportunities, and if deemed acceptable from both a risk and return basis, develop and execute the project. New Business Development AEV seeks to capture opportunities in sectors in which it believes it could further leverage on its core competencies, are scalable, and with strong recurring profits and cash flow. To this end, the Company formed a Business Development Team in late 2011 to evaluate new business opportunities that do not fall squarely into the Company’s traditional core business areas of power, banking, and food. Earlier, AEV disclosed a couple of initiatives which it hopes will serve as new avenues of growth in the years to come.


1. Production of Liquid Biomethane

In June 2012, AEV partnered with British company Gazasia Ltd. to build a plant that produces liquid bio-methane fuel from organic waste. Aseagas, the company that will undertake this project, will employ existing and proven technology to produce renewable energy. Aseagas is already registered with the Department of Energy (DOE) and Board of Investments (BOI), and can now fully avail of the incentives under the Renewal Energy Law (RE Law). AEV’s wholly-owned subsidiary Aseagas will invest US$ 50 mn for an initial plant with capacity of around 9,000 metric tons of bio-methane per year. A notes facility of π2 bn has already been closed to fund the project. The construction commenced last March 18, 2014 and expected to be completed in December 2015. Should the pilot project be successful, then operations could be easily scaled up.

2. Davao Bulk Water Supply Project

AEV and J.V. Angeles Construction Corporation (JVACC) formed a joint venture company called Apo Agua Infrastructura, Inc. (Apo Agua). This consortium will construct both a raw water treatment facility with RE component and conveyance system which will deliver 300 million liters per day (MLD) of treated bulk water to Davao City, the third largest city in the Philippines. Apo Agua is 70% owned by AEV and 30% owned by JVACC. Hedcor, Inc., an affiliate of AEV specializing in the design, construction and operations of mini-hydropower plants, will provide the technical and operational expertise for the hydro-electric component of the project. On the other hand, JVACC will bring to the partnership its 48 years of experience in construction and development of water-related infrastructure. JVACC submitted an unsolicited proposal to the local water agency in early 2013. On June 20, 2014, JVACC informed AEV that it received, on behalf of the Jose V. Angeles Construction Consortium, the Notice of Award (NoA) from the Davao City Water District (DCWD) for the financing, design, construction and operations of the Tamugan Surface Water Developments Project. On March 17, 2015, Apo Agua signed the contractual joint venture agreement and bulk water purchase agreement (BWPA) with DCWD. The construction will commence once all the permits are secured.

3. Bidding for the operation and maintenance of the existing LRT Line 2 (LRT2) system and the Masinag Extension system

AEV submitted the pre-qualification documents on January 27, 2015 to the Department of Transportation and Communication (DOTC) for the bidding of the operation and maintenance of the existing LRT Line 2 (LRT2) system and the Masinag Extension system. AEV is participating in the bidding through a consortium referred to as the Aboitiz-SMRT Transport Solutions Consortium, in partnership SMRT International Pte. Ltd. SMRT International Pte. Ltd is a wholly-owned subsidiary of SMRT Corporation Ltd. (SMRT), a multi-modal transport service provider in Singapore offering rail, bus and taxi services. SMRT is the largest rail operator in Singapore, operating three of the five metro lines and a light rail system.


4. Bidding for the P123.8 bn Laguna Lakeshore Project

AEV, through Team Trident consortium, filed the pre-qualification documents with the Department of Public Works and Highways (DPWH) for the bidding to finance, design, construct, operate and maintain the Laguna Lake Expressway- Dike Project under the PPP Program of the government. Team Trident is a consortium among AEV, Ayala Land, Inc. (ALI), Megaworld Corporation (MEG), SM Prime Holdings, Inc. (SMPH) and the lead member, Trident Infrastructure and Development Corporation (TIDC). TIDC is a joint venture company among AEV, ALI, MEG and SMPH, incorporated for purposes of pre-qualifying for the bidding and evaluating the feasibility of the Project.

Power (Generation Business) AboitizPower believes that its power generation business is in a very good position to benefit from the opportunities that developments concerning the electricity industry will bring. The company’s sound financial condition, coupled with a number of initiatives that the company is undertaking will allow it to create additional generating capacity over the next several years. On the other hand, the expiration of the ITH of several of the company’s plants over the next few years is expected to have some impact on earnings.

1. Expiration of ITH

Several of AboitizPower’s plants were eligible for an ITH upon their acquisition by the company. Upon the expiration of the ITH, the respective plants will now be assessed a corporate income tax in accordance with the relevant laws. SN Aboitiz Power-Magat, Inc. SN Aboitiz Power-Magat obtained the BOI's approval of its application as new operator of the Magat Plant with a pioneer status, which approval entitles it to an ITH until July 11, 2013. On November 16, 2012, the BOI approved SN Aboitiz Power-Magat’s application for a one-year extension of its ITH holiday until July 11, 2014. After the lapse of SN Aboitiz Power Magat's ITH, it is liable to pay income tax. Consequently, the first full-year impact of SN Aboitiz Power Magat’s ITH expiration will be felt in 2015. SN Aboitiz Power-Benguet, Inc. The Binga Plant obtained an income ITH extension from the BOI in October 9, 2012. The ITH for the Binga Plant will expire on August 11, 2015, while Ambuklao Plant also obtained an ITH extension on March 6, 2013, which will be valid until June 30, 2018.

2. Increase in Attributable Generating Capacity

Not withstanding the challenges over the short-term, AboitizPower has built the necessary foundation to sustain its growth trajectory over the long term. Over the next several years, AboitizPower looks to expanding its portfolio of generation assets by implementing the following projects. - Greenfield and Brownfield developments (for completion in 2015) 300-MW CFB Coal-Fired Power Plant in Davao. AboitizPower, through 100%-owned subsidiary TSI, is constructing a 2x150 MW CFB coal-fired power plant in Davao, which is the biggest load center on the island of Mindanao. The project broke ground in May 2012. The EPC contract for the power block was awarded to Formosa Heavy Industries (FHI) with FHI supplying the CFB boilers and Fuji as major subcontractor/supplier of the turbine-generators. The EPC contract for the balance


of plant equipment and their integration with the power block was awarded to a consortium led by Black & Veatch Corporation. Commissioning and testing of the first unit began in the fourth quarter of 2014. The facility is expected to become fully operational by mid-2015, thereby providing Mindanao with much-needed reliable and competitively-priced base-load power. 14-MW Sabangan Hydro Power Plant Project. This involves the construction and operation of a hydropower plant facility in Mt. Province, in Northern Luzon by first half 2015. This project will be undertaken by a wholly owned subsidiary of AboitizPower, Hedcor Sabangan, Inc. The project, which is the first to be constructed in Mt. Province, will take approximately 24 months to construct and is expected to be commissioned in March 2015. - Greenfield and Brownfield developments (for completion beyond 2015) 600-MW (net) Coal-Fired Power Plant in Subic. This is a project by Redondo Peninsula Energy, Inc. (RP Energy), a joint venture among Meralco PowerGen Corporation (MPGC), AboitizPower's Subsidiary, Therma Power, Inc. (TPI) and Taiwan Cogeneration International Corporation (TCIC). AboitizPower, through TPI has an equity interest of 25% in RP Energy. The project involves the construction and operation of a 2x300 MW (net) CFB coal-fired power plant located within the Subic Bay Freeport Zone. On November 15, 2012, RP Energy was issued an amended Environmental Compliance Certificate (ECC) to cover two high-efficiency 300-MW (net) units with main steam reheat systems. Site preparation is substantially completed. The selected EPC contractor is Hyundai with Foster Wheeler and Toshiba as major subcontractors/suppliers of the CFB boilers and turbine-generators, respectively. Hyundai has not yet been notified to proceed with the works, however, because of the filing with the Supreme Court of a petition for a Writ of Kalikasan and Environmental Protection Order by an ad hoc group of individuals and organizations. The petition was remanded to the Court of Appeals for a hearing. The Court of Appeals denied the issuance of Writ of Kalikasan for lack of merit, but nonetheless, nullified RP Energy’s ECC and land lease with SBMA on grounds of DENR's non-compliance with procedural requirements and SBMA's failure to secure LGU approvals/endorsements, respectively. This decision was the subject of three Petitions for Review on Certiorari to the Supreme Court filed by RP Energy, DENR and SBMA. On February 3, 2015, the Supreme Court promulgated its decision denying the petition for Writ of Kalikasan and declaring valid the project’s ECC and land lease with SBMA, paving the way for the project to proceed. In view of the Supreme Court’s decision, full development and implementation of the project has been resumed with the expected commercial operation of the power plant now planned by late 2018. 420-MW Pulverized Coal-Fired Expansion Unit 3 in Pagbilao, Quezon. AboitizPower, through wholly owned subsidiary TPI, and TeaM (Philippines) Energy Corporation (TPEC), whose shareholders are Marubeni Corporation (Marubeni) and Tokyo Electric Company (TEPCO), through TPEC Holdings Corporation (TPEC Holdco) have formed Pagbilao Energy Corporation (PEC) to own Unit 3. The terms and conditions of the joint investment were finalized in a definitive shareholder agreement between the parties. Unit 3 will be located within the premises of the existing 735-MW (net) Pagbilao Units I and II Coal-Fired Thermal Power Plant in Quezon province. Marubeni and TEPCO are also shareholders of TeaM Energy Corporation, which owns and operates the Pagbilao Units 1 and 2 under a build-operate-transfer contract with the National Power Corporation (NPC). AboitizPower’s wholly owned


subsidiary, TLI, is the Administrator of the Energy Conversion Agreement between TeaM Energy Corporation and NPC under an Independent Power Producer Administration Agreement with the Power Sector Assets and Liabilities Management Corporation (PSALM), which manages the assets and IPP contracts of NPC. On April 25, 2014, PEC entered into a contract with a contractor consortium comprised of Mitsubishi Hitachi Power Systems Ltd., Daelim Industrial Co., Ltd., DESCO, Inc. and Daelim Philippines, Inc. to provide the engineering, procurement and construction (EPC) services required for the project. Notice to Proceed with the works was issued to the consortium on April 30, 2014. The debt financing for the project closed on May 30, 2014. The plant construction commenced last September 2014 and the target commercial operation is planned for year-end 2017. 340-MW CFB Coal-Fired Project in Toledo City, Cebu. This is a project of TVI, a partnership between AboitizPower and Vivant. AboitizPower will have an equity interest of 80% in TVI. This project involves the construction of a 2x170-MW coal-fired power power project located south of Toledo City. The project site was acquired in December 2011. The ECC for the project was issued in May 2013.

Technical specifications, contract drawings, contract conditions, and requests for EPC proposals were issued on July 15, 2013, with a submission deadline of November 15, 2013, thereafter extended to November 29, 2013. The EPC contract was awarded to Hyundai Engineering Co. Ltd. (HEC) and limited notice to proceed (LNTP) with engineering design and detailed subsurface investigations of the site issued on May 30, 2014. This was followed by the project notice to proceed (NTP) for all EPC activities on March 18, 2015. Turnover of the first unit is targeted for the first half of 2018, with the second following three months thereafter. 68-MW Manolo Fortich Hydropower Plant Project. Hedcor Bukidnon, Inc. (Hedcor Bukidnon) plans to start construction of the Manolo Fortich project within the second quarter of 2015 due to delays in securing permits. It is composed of the 43-MW Manolo Fortich 1 and 25-MW Manolo Fortich 2. Hedcor Bukidnon has completed the Memorandum of Agreement with the LGUs. It is currently waiting for the issuance of its water permit, after which a 24-month construction period will follow. Other Greenfield and Brownfield developments. AboitizPower, together with its subsidiaries and associate company, is engaged in the origination and development of other greenfield and brownfield project opportunities, for example: • AboitizPower recently partnered with SunEdison to develop photovoltaic solar

project opportunities in the Philippines. This is consistent with the company’s focus on environmental sustainability and diversified power generation technologies. The agreement formalizes SunEdison’s intention to jointly explore, develop, construct and operate up to 300 MW of utility-scale solar photovoltaic power generation projects in the Philippines over the next three years.

• SN Aboitiz Power-Greenfield, Inc. (SN Aboitiz Power-Greenfield)'s Development

Program aims to grow its renewable energy portfolio by looking at potential small and large hydro projects in the Philippines, primarily within its current host communities in northern Luzon.

SN Aboitiz Power-Greenfield secured renewable energy service contracts (RESCs) from the DOE on December 2, 2013 for its proposed 6-MW Maris South


Canal and 1.75-MW Maris North Canal mini-hydropower projects located downstream of the National Irrigation Administration (NIA)-owned and -operated Maris dam and reservoir. The Maris dam and reservoir, which form the tailwater of Magat hydroelectric power plant, is situated at the boundary of Alfonso Lista, Ifugao and Ramon, Isabela. SN Aboitiz Power-Greenfield is currently waiting for DOE approval of the assignment of the RESCs to SN Aboitiz Power-Magat. NIA and SN Aboitiz Power-Magat have signed a Memorandum of Understanding (MOU) for SN Aboitiz Power-Greenfield to develop both projects. On July 24, 2014, SN Aboitiz Power-Ifugao, Inc. has also secured RESCs for its proposed 350-MW hydropower complex project in Ifugao, which is composed of three facilities: the 100-MW Alimit hydropower plant, the 240-MW Alimit pumped storage facility, and the 10-MW Olilicon hydropower plant. Both Maris and Alimit projects are currently in feasibility study stage. SN Aboitiz Power-Magat and the NIA held the ground-breaking ceremony for the optimization of the Maris Reservoir on November 4, 2014. Maris Optimization is a project of NIA with SN Aboitiz Power-Magat as its project partner. It aims to raise the Maris Reservoir by adding a set of stoplogs about three meters high. The project is expected to add some eight million cubic meters of storage, and will also entail refurbishment and improvements to the Maris dam structure for better irrigation water delivery and safety. Work is scheduled to begin in January 2015 and targeted for completion by the first quarter of 2016.

• Hedcor continually explores hydropower potentials located in Luzon and Mindanao. Based on current findings, Hedcor sees the potential of building power plants with capacities ranging from 20 MW to 80 MW. When the projects pass the evaluation stage and once permits are secured, the two-year construction period for the hydropower plant facilities will commence.

Additionally, Hedcor's Ferdinand L. Singit (FLS) Power Plant is nearing the completion of its expansion from 4.9 MW to 6.1 MW with the installation of new turbines and generators.

• AboitizPower is also exploring new geothermal resources. Currently, pre-development works are ongoing in several areas namely, Negron-Cuadrado located in Central Luzon and Mt. Apo located in Mindanao. Both the Negron-Cuadrado and Mt. Apo geothermal projects have been awarded geothermal renewable energy service contracts (GRESC) by the DOE.

3. Participation in the Government’s Privatization Program for its Power Assets

AboitizPower continues to closely evaluate the investment viability of the remaining power generation assets that PSALM intends to auction off. AboitizPower is also keen on participating in PSALM’s public auction for the IPP Administrator contracts, which involves the transfer of the management and control of total energy output of power plants under contract with NPC to the IPP administrators. In November 2013, Aboitiz Energy Solutions, Inc. (AESI) participated in the bidding for the IPPA of the strips of the Unified Leyte Geothermal Power Plant (ULGPP). AESI won 40 strips of energy corresponding to 40-MW capacity of ULGPP. The NoA


was issued to AESI on January 29, 2014. This IPPA contract will allow AESI to sell 40 MW of geothermal power from ULGPP, beginning December 26, 2014.

Power (Distribution Business) AboitizPower remains optimistic that it will realize modest growth on its existing distribution utilities. It continually seeks efficiency improvements in its operations to maintain healthy margins. On December 13, 2006, the ERC issued the Rules for Setting Distribution Wheeling Rates (RDWR) for privately-owned distribution utilities entering PBR for the second and later entry points, setting out the manner in which this new PBR rate-setting mechanism for distribution-related charges will be implemented. PBR replaces the Return on Rate Base (RORB) mechanism which has historically determined the distribution charges paid by customers. Under PBR, the distribution-related charges that distribution utilities can collect from customers over a 4-year regulatory period is set by reference to projected revenues which are reviewed and approved by the ERC and used by the ERC to determine a distribution utility’s efficiency factor. For each year during the regulatory period, a distribution utility’s distribution charges are adjusted upwards or downwards taking into consideration the utility’s efficiency factor as against changes in overall consumer prices in the Philippines. The ERC has also implemented a Performance Incentive Scheme whereby annual rate adjustments under PBR will take into consideration the ability of a distribution utility to meet or exceed service performance targets set by the ERC, such as the average duration of power outages, the average time of restoration to customers and the average time to respond to customer calls, with utilities being rewarded or penalized depending on their ability to meet these performance targets. Cotabato Light’s Second Regulatory Period ended on March 31, 2013. A reset process should have been initiated 18 months prior to the start of the Third Regulatory Period covering April 1, 2013 to March 31, 2017. The reset process, however, has been delayed due to the issuance of an Issues Paper on the Implementation of PBR for Distribution Utilities under the RDWR by the ERC in 2013. This paper aims to revisit various matters relating to the reset process. The ERC has solicited comments from industry participants and has held several public consultations in Manila, Cebu and Davao from January to March 2014. In addition, several focus group discussions (attended by representatives from the academe, consumer groups, DUs and NGCP) were held in Manila, Cebu and Cagayan de Oro from April to May 2014. These discussions aimed to focus on particular topics which included valuation of the regulatory asset base, annual revenue requirement building blocks, WACC, among others. ERC has yet to release a final position paper on what would be its future actions on the implementation of PBR. Similar to Cotabato Light, VECO and Davao Light’s Second Regulatory Period also already ended on June 30, 2014. The three DUs are still implementing the distribution, supply and metering charges approved for the last year of the Second Regulatory Period. For SEZ and SFELAPCO's fourth regulatory year covering October 1, 2014 to September 30, 2015, public hearings have been completed before the end of calendar year 2014. The case applications are under evaluation by the ERC. On June 19, 2014, AboitizPower acquired 100% ownership interest of Lima Enerzone Corporation (formerly: Lima Utilities Corporation) (Lima Enerzone) from Lima Land, a wholly owned subsidiary of AboitizLand. Lima Enerzone is the electricity distribution utility serving the LiMA Technology Center located in Batangas. The acquisition is in line with the company’s strategy of expanding its EnerZone brand.


Market and Industry Developments

1. Open Access and Retail Competition

Per EPIRA, the conditions for the commencement of the Retail Competition and Open Access (Open Access) in a particular grid are as follows: (a) Establishment of the WESM; (b) Approval of unbundled transmission and distribution wheeling charges; (c) Initial implementation of the cross subsidy removal scheme; (d) Privatization of at least 70% of the total capacity of generating assets of NPC within the

respective grids; and (e) Transfer of the management and control of at least 70% of the total energy output of power

plants under contract with NPC to the IPP administrators. Under the Open Access, an eligible contestable customer, which is defined as an end-user with a monthly average peak demand of at least 1 MW for the preceding 12 months, will have the option to source their electricity from eligible suppliers that have secured a Retail Electricity Supplier (RES) license from the ERC. Commencement of Open Access In June 2011, ERC declared December 26, 2011 as the Open Access Date to mark the commencement of the full operations of the competitive retail electricity market in Luzon and Visayas. However, after careful deliberation, the ERC acknowledged that not all the necessary rules, systems and infrastructures required for the implementation of the Open Access have been put in place to meet the contemplated timetable for implementation. In October 2011, the ERC announced the deferment of the Open Access Date. In September 2012, the ERC declared that Open Access will commence on December 26, 2012. Open Access commercial operations under an interim development system have been implemented starting June 26, 2013. The implementation of Open Access starting June 26, 2013 enabled AboitizPower to increase its contracted capacity through the delivery of power to affiliate and non-affiliate RES companies. AboitizPower has two wholly owned subsidiaries (i.e. AESI and AdventEnergy) that are licensed RES. Open Access allowed AESI and AdventEnergy to enter into contracts with the eligible contestable customers. Moreover, Open Access also facilitated AboitizPower to contract with other RES companies. Currently, AboitizPower has signed contracts equivalent to approximately 300 MW through its RES companies. Based on the current timeline, the threshold level for an eligible contestable customer will decrease to a minimum of 750 kW monthly average peak demand (from the current 1 MW threshold) by June 2015. ERC Resolution 22 Series of 2013 ERC issued revised licensing regulation for RES companies operating in the Retail Supply Segment last December 19, 2013. Items amended include the following:

• Restriction for Generator, IPPA and DU affiliates in securing license as a RES company; • Transfer of live Retail Supply Contracts (RSCs) for RES with expired license to another

licensed RES; • Determination of full retail competition to be made by ERC not later than June 25, 2015; • Contracted capacities of RES affiliates to be included in the grid limitations imposed on

Generation Companies; • End-user affiliate RES limited to supplying up to 50% of its total contestable customer

affiliates;


• RES companies are limited to procuring up to 50% of its generation requirements from affiliate Generation Companies;

• Annual submission of 5-year Business Plan; and • Submission of live Retail Supply Contracts for review by the ERC.

Since Resolution 22 Series of 2013 limits the retail suppliers and creates non-assurance of renewal of RES license for existing retailers, the Retail Electricity Suppliers Association (RESA) challenged its legality at the Pasig RTC. Trial is suspended to give way to amicable settlement of issues between RESA and ERC. However, ERC has issued Resolution No. 17, Series of 2014, which holds in abeyance the evaluation of RES license applications, and suspends the issuance of RES licenses, pending the ERC’s promulgation of the amended RES License Rules. 2. Interim Mindanao Electricity Market (IMEM) The DOE issued Department Circular No. 2013-05-0008 “Promulgating the Interim Mindanao Electricity Market Implementing Rules”. Correspondingly, DOE also issued DC No. 2013-09-0020 approving pertinent IMEM Manuals. The IMEM has the following features:

• Day-ahead pricing and scheduling; • Zonal pricing; • IMEM is for available resource capacity after taking out bilateral contract quantities; • In-Day Market is for imbalances or deviation from day-ahead schedules only; and • Deviations from day-ahead schedule will be subject to penalties and incentives.

The IMEM started on December 3, 2013 and the first IMEM billing period ended on December 25, 2013. The first IMEM billing period has not been fully settled and succeeding billing periods were still not billed by PEMC. Last March 2014, PEMC suspended the implementation of IMEM. 3. Price Hike Issue for November and December 2013 Billing Months Due to the maintenance shutdown of Malampaya Natural Gas Field, the dispatch of Natural Gas-fired power plants were affected which caused the increase in the WESM prices in November and December 2013 Billing Months. The Supreme Court issued a Temporary Restraining Order (TRO) in GR Nos. 210245 and 201255, pegging the generation charge of Meralco to π5.6673/ kWh. The TRO should have ended last February 2014, but this has been extended indefinitely through a notice provided by the Supreme Court last April 22. The extended TRO also includes the generators non-collection of the increase in generation charge. Issuance of ERC Case No. 2014-021MC ERC issued ERC Case No. 2014-021 MC “In the Matter of the Prices in the Wholesale Electricity Spot Market (WESM) For the Supply Months of November and December 2013 and the Exercise by the Commission of its Regulatory Powers to Intervene and Direct the Imposition of Regulated Prices therein without Prejudice to the ongoing Investigation on the Allegation of Anti- Competitive Behavior and Possible Abuse of Market Power Committed by some WESM Participants” on March 3, 2014. The ERC issued an Order to VOID the WESM Prices in Luzon for November and December billing periods and declares the imposition of regulated prices in lieu thereof, in the exercise of its police power. The ERC Order adjusted prices retroactively. Regulated prices are calculated based on the load weighted average of the ex-post nodal energy prices and meter quantity of the same day same interval that have not been administered from December 26, 2012 to September 25, 2013. The Order includes the availment of oil-based plants of additional compensation to cover their full Fuel


and Variable O&M Costs. Several subsidiaries and affiliates of AboitizPower, most notably SN Aboitiz Power Magat, SN Aboitiz Power Benguet, APRI, and TLI, will be affected by the decision as they had exposure to the spot market during the November-December period either as purchasers (as in the case of TLI), or as sellers. Various companies have already filed cases to the Court of Appeals, after the ERC denied their various Motions for Reconsideration regarding ERC Case No. 2014-021MC. 4. Reserve Market The DOE issued Department Circular No. DC2013-12-0027, “Declaring the Commercial Launch for the Trading of Ancillary Service in Luzon and Visayas under the Philippine Wholesale Electricity Spot Market” dated December 2, 2013. The said Department Circular sets the responsibility of the Philippine Electricity Market Corporation (PEMC), NGCP, National Electrification Administration (NEA) and all WESM members with regards to the operation of the Reserve Market. The trial operations started on February 26, 2014, and PEMC is still reviewing its results before certifying for market readiness. The Pricing and Cost Recovery Mechanism of the Reserve Market is still under review by the ERC under ERC Case No. 2007- 004RC. The last hearing was on March 13, 2014. The Reserve Market will cover three reserve categories, namely: Frequency Regulation, Contingency Reserve and Dispatchable Reserve. The Reserve Market will also include the scheduling of the ancillary services under ASPA with NGCP. No date has been set for the launch of the Reserve Market. Financial Services UnionBank’s initiatives on strengthening its customer franchise will continue to be at the forefront as it prioritizes customer satisfaction through enhanced retail focus, superior innovation and product customization, and stronger sales management approach. UnionBank will continue to invest in technology, cultivate partnerships and rationalize branch network expansion in strategic areas to maximize growth channels with respect to both deposits and loan accounts. UnionBank will continue to focus on improving the performance of its earning assets portfolio, with loan asset acquisition in the retail, middle-market and corporate sectors. The bank will implement a disciplined asset allocation built on good governance and effective risk management to ensure momentum of recurring income stream. At the same time, UnionBank is focusing on improving its deposit liabilities mix by targeting low-cost funds (i.e. CASA). Likewise, UnionBank will continue to enhance operating efficiencies through cost containment efforts and improvements in its business processes and systems to align with international standards and best practices, and increase in manpower productivity with the help of functional and developmental trainings as well as appropriate matching of job, skills and capabilities. UnionBank will also promote customer advocacy by cultivating employee engagement throughout the organization. The bank believes that by doing this, it can optimize employee behavior to drive long-term financial and operational performance and growth. In line with this, the bank initiated “middle-out” strategic programs, which strive to propel UnionBankers to higher levels of engagement, particularly through the conduct of culture conversations, fostering REaCh Programs and celebrating DNA Stories. CitySavings, the subsidiary thrift bank of UnionBank, will continue with its unique focus as the preferred Teachers’ Bank in the Philippines, particularly expanding its customer franchise in areas outside of its present coverage. It will continuously enhance its products and services to strengthen its market position in its present niche and tap other civil servant market segments.


The combined unique strengths of UnionBank and CitySavings’ management teams as well as their attained technological and financial capabilities will catapult both to greater heights towards elevating the lives of its stakeholders and the communities they serve. Food Manufacturing In September 2014, Pilmico broke ground on the construction of its Iligan Feedmill 3 to answer the growing demand of feeds in the Visayas and Mindanao regions. This is an additional 124,800 MT in feedmill capacity and is expected to start commercial operation by October 2015. To cater to the additional raw material requirements and feeds volume caused by the expansion of Feedmill 3, Pilmico has started the construction of the Inter-Island Pier 2 in December 2014. This will resolve the bottle neck in the delivery of raw materials to Iligan and the disbursement of feeds to the other parts of Visayas and Mindanao. The Inter-Island Pier 2 is expected to be operational by July 2015. Anchoring on Pilmico’s core strength as flour millers, Pilmico is exploring the opportunity to grow the Flour business internationally. In June 2014, Pilmico established its first Southeast Asian representative office in Jakarta Selatan, Indonesia. This move will allow Pilmico to build its market in Indonesia where flour per capita consumption is higher at 20kg/capita versus the Philippines 18kg/capita consumption. This is only the first step. As it deepens its reach in the Indonesian market and builds its competitiveness in the Flour milling industry, further efforts will be made to strengthen its presence in the ASEAN region. To continually grow the Farms business, PANC is looking at increasing its sow level to 14,000 by 2017. This is more than twice as much the size of its Farms business from its first expansion of 6,500 in 2012. At this level, its monthly sales volume would reach 22,000 heads, a 70% increase from 2014 level. This would make PANC one of the biggest producers of market hogs in the country. In 2015, PANC will be starting its layer farms operations. The facility in Tarlac can hold up to 160,000 egg-laying chickens that would translate to 4.16 mn eggs per month. In August 2014, Pilmico International successfully acquired a 70% equity stake in feedmill operator Vinh Hoan 1 Feed JSC (VHF) from its parent company Vinh Hoan Corporation (VHC). Pilmico International is set to purchase the remaining shares within five years at a pre-agreed price. Pilmico’s entry in Vietnam marks the first international investment of the Aboitiz Group. In January 2015, VHF was official renamed as Pilmico VHF Joint Stock Company. Real Estate Two decades ago, AboitizLand was founded with a straightforward mandate to make quality developments for the enjoyment of every Cebuano. As of 2014, AboitizLand has succeeded in delivering dream homes and business offices to more than 3,000 partners, making it one of Cebu’s premier homebuilder. Now, AboitizLand’s primary undertaking is to grow the business on a national scale while intensifying its market position in Cebu. From the early projects to the recent ones, the residential segment of the company has gone many property cycles, and emerged not only bigger but stronger over the years. As AboitizLand goes national, the company looks forward to launch more projects with increased excellence. The industrial business unit, on the other hand, carved the first milestone of expansion when it acquired Lima Land, the developer of Lima Technology Center in Batangas. This acquisition gave AboitizLand a firm foothold in the Luzon industrial real estate market. To further increase its momentum, Lima Land's 150-hectare expansion is underway to substantially augment the company’s revenue and profit levels. With Lima Land, AboitizLand now owns and operates three major industrial zones, including Mactan Economic Zone II and West Cebu Industrial Park.


On the commercial side, due to the tremendous success of The Outlets at Pueblo Verde, an expansion to almost double capacity is on its way. Capitalizing on the sustained growth of its projects, AboitizLand unceasingly explores new commercial businesses to complement its existing and future residential and industrial developments. With AboitizLand’s effort to continue searching for new elements to integrate into its portfolio, the 50-50 joint venture with the Ayala Land group was formed in February 2014. Cebu District Property Enterprise Inc. was incorporated to develop the 15-hectare Mandaue City property into a city center with residential, commercial, retail and office components. Looking ahead, despite the challenges in the industry, AboitizLand is geared to achieve its growth objectives, surpass old limits and claim its share of the national market. Year ended December 31, 2013 vs. Year ended December 2012

The following discussion and analysis of the financial condition and results of operations of Aboitiz Equity Ventures, Inc. (“AEV” or the “Company” or the “Parent Company”) and its subsidiaries should be read in conjunction with the audited consolidated financial statements and accompanying disclosures set forth elsewhere in this report.

Adoption of Philippine Accounting Standard (PAS) 19, Employee Benefits (Revised) On January 1, 2013, the Group adopted the amended PAS 19. Consequently, the 2012 and 2011 consolidated financial statements have been restated to comply with the required retrospective application of said standard. Top Five Key Performance Indicators Management uses the following indicators to evaluate the performance of the registrant and its subsidiaries: KEY PERFORMANCE INDICATORS (KPI) (Amounts in thousands except financial ratio data)

JAN-DEC 2013 JAN-DEC 2012 (As restated)

EQUITY IN NET EARNINGS OF INVESTEES 10,596,577 13,322,144

EBITDA 36,492,444 40,870,873 CASH FLOW GENERATED:

Net cash provided by operating activities 25,343,680 25,473,439

Net cash used in investing activities (12,645,557) (1,551,918)

Net cash used in financing activities (10,352,608) (19,693,620)

Net Increase in cash & cash equivalents 2,345,515 4,227,901

Cash & cash equivalents, beginning 33,730,531 29,543,492

Cash & cash equivalents, end 36,118,190 33,730,531

CURRENT RATIO 2.64 2.57

DEBT-TO-EQUITY RATIO 1.02 0.97


DESCRIPTION OF KEY PERFORMANCE INDICATORS:

1. EQUITY IN NET EARNINGS OF INVESTEES

Equity in net earnings (losses) of investees represents the group’s share in the undistributed earnings or losses of its associates for each reporting period subsequent to acquisition of said investment, net of goodwill impairment cost, if any. Goodwill is the difference between the purchase price of an investment and the investor’s share in the value of the net identifiable assets of investee at the date of acquisition. Equity in net earnings (losses) of investees indicates profitability of the investments and investees’ contribution to the Group’s consolidated net income.

Manner of Computation: Investee’s Net Income (Loss) x Investor’s % ownership – Goodwill Impairment Cost.





4. CURRENT RATIO




DISCUSSION ON KEY PERFORMANCE INDICATORS: All the KPI values were within management’s expectation during the year in review. Management teams of the different businesses continued to effectively handle their respective operations and financial requirements. As a result, profitability had been sustained and financial position remained strong and liquid. Associates continued to generate substantial earnings and enhance the consolidated bottomline, even with the 20% decline in their income contribution to the Group. Consolidated EBITDA translated into additional cash inflows coming from subsidiaries’ operations and from dividend payments of associates. The internally-generated funds were then used to finance capital expenditures, prepay debt, and distribute cash dividends to stockholders.


Despite higher fund usage this year compared to 2012, the financial position of the Group remained strong, as indicated by healthy financial ratios at the end of December, 2013. Review of January - December, 2013 Operations vs January - December, 2012 Results of Operations For the year 2013, AEV and its subsidiaries posted a consolidated net income of P21.03 billion, a 12% YoY decrease. This translates to an earnings per share of P3.81. In terms of income contribution, power group still accounted for the bulk at 72%, followed by the banking, food and real estate groups at 21%, 6% and 1%, respectively. The Group generated a non-recurring net gain of P22 million (versus P541 million in 2012), which comprised the following: 1.) P1.44 billion share of power group’s net foreign exchange losses from the revaluation of dollar-denominated loans and placements; 2.) P1.30 billion gain generated mainly from the sale of CSB shares by AEV and PILMICO; and 3.) P161 million share of power group’s one-time net gain primarily due to the step-acquisition of a subsidiary. Stripping out these one-off items, the Group’s core net income for the current period amounted to P21.0 billion, down 10% YoY. Business Segments The individual performance of the major business segments is discussed as follows: Power Aboitiz Power Corporation (AP or AboitizPower) ended the year with an income contribution of P14.20 billion, a 24% decrease from last year’s P18.77 billion. AP’s generation group reported a 33% YoY dip in earnings contribution to AEV, from P17.4 billion to P11.7 billion, attributed to the lower margins registered by the Pagbilao plant, higher fuel cost brought about by the implementation of the Geothermal Resource Supply Contract of the Tiwi-MakBan plants, decrease in ancillary sales and average selling prices. The decline in ancillary service revenue of certain power associates was mainly due to the lower acceptance rate by the National Grid Corporation of the Philippines (“NGCP”). As compared to 2012 levels, average selling prices decreased by 3% resulting from the 7% drop in average selling rates of the group’s bilateral contracts. While average spot market prices increased by 9%, the Group’s exposure to the spot market significantly declined in line with the generation companies’ shift into de-risked capacity based contracts. The decline in selling prices negatively affected the revenues of both generation subsidiaries and associates. Generation group’s attributable net generation for the year in review grew by 3% YoY, from 10,660 gigawatthours (GWh) to 10,949 GWh due to increase in demand. Spot market sales grew by 37% YoY from 1,398 GWh to 1,914 GWh, while power sales through bilateral contracts for the year declined by 2% from 9,961 GWh to 9,035 GWh. On a capacity basis, the group’s attributable sales increased by 3% YoY from 1,547 MW to 1,590 MW as a result of higher bilateral capacity and spot market sales despite lower sales for ancillary service as well as a decrease in bilateral energy sales. Meanwhile, AP’s distribution group registered a 14% YoY rise in earnings contribution to AEV, from P2.17 billion to P2.48 billion. Driving this growth was the 5% YoY expansion in the power consumption of residential customers and the 3% YoY increase in both commercial and industrial segments. Approved rate adjustments under the Performance-Based Rate setting (PBR), and lower systems loss as a result of the initiatives implemented during the current period, also enhanced the group’s profit margins.


Banking Income contribution from this industry group grew by 7%, from P3.85 billion to P4.11 billion. With Union Bank of the Philippines’ (UBP) purchase of City Savings Bank, Inc. (CSB or CitySavings) and the resulting consolidation of CSB into UBP, the banking group is now comprised of only UBP. UBP’s full-year net income for 2013 was higher at P9.03 billion (vs P7.61 billion in 2012) mainly due to the 184% growth in feebased revenue (P2.4 billion vs. P862 million in 2012) and the 22% growth in net interest income (P8.9 billion from P7.3 billion in 2012) due largely to the YoY expansion in the average level of earning assets notwithstanding compression in asset yields. The over-all increase in revenue was partially offset by the 21% rise to P10.4 billion in operating expenses.

Food Income contribution from Pilmico Foods Corporation (PFC or Pilmico) and its subsidiaries amounted to P1.26 billion, down 3% YoY, mainly attributed to the weaker performance of the Feeds divisions as input costs remained higher compared to the previous year. Meanwhile, the Flour and Farms divisions registered growth in income attributable to lower interest expense as a result of the pre-termination of a long-term loan in Flour and higher selling prices coupled with lower input costs in Farms. Real Estate The full-year income contribution of AboitizLand amounted to P273 million. Revenues of P1.8 billion mainly came from the residential segment which generated 57% of the sales. Meanwhile, the industrial segment contributed 40% to total revenues, with commercial and property management segments accounting for the remaining 3%. The P708 million revenues registered by the industrial segment includes P339 million in revenue contribution from Lima Land. AboitizLand acquired 60% of Lima Land in October 2013. The remaining 40% stake was acquired in February 2014. Material Changes in Line Items of Registrant’s Statements of Income and of Comprehensive Income For the period ended December 30, 2013, consolidated net income allocable to the equity holders of AEV registered a 12% decline, reaching P21.03 billion from P23.96 billion posted in the previous year. Operating profit for the current year amounted to P21.22 billion, an 8% decrease YoY, as the P11.58 billion increase in costs and expenses surpassed the P9.86 billion rise in revenues. This decline was mainly attributed to the performance of power group and the deconsolidation of CSB. Power subsidiaries reported a 5% YoY decline in operating profit from P20.46 billion to P19.48 billion substantially due to the drop in margins reported by AP Renewable, Inc. (APRI) and Therma Luzon, Inc. (TLI). For APRI, the contraction was due to the decrease in MWh sold and increase in fuel costs. For TLI, its negative margins in the fourth quarter of 2013 was attributed to the expensive replacement power it had to purchase to serve its sales contracts when Pagbilao plant was shut down for scheduled and unscheduled repairs. These decreases were partially countered by the increase resulting from the first-time consolidation of VECO’s positive margins. With AP’s step acquisition of VECO into a subsidiary in 2013, VECO’s accounts were now consolidated into the Group’s financial statements. As a consequence of AEV and PILMICO’s sale of their investment in CSB to UBP, an associate, CSB’s accounts were deconsolidated from the Group’s financial statements at the start of 2013. This deconsolidation of CSB, which contributed P793 million to the Group’s operating profit in 2012, accounted for the additional drop in the Group’s 2013 operating profit.


Adding to the decline in operating profit, equity earnings in associates and other income also reduced, but was partially offset by the decrease in net interest expense and income tax provision. The 20% YoY drop in net interest expense (P5.27 billion vs P6.56 billion in 2012) was mainly attributed to lower level of debt in early 2013 resulting from the pre-termination of longterm loans during the second half of 2012 and the first half of 2013. Share in net earnings of associates dropped by 20% YoY (P10.60 billion vs P13.32 billion in 2012) principally due to the decline in income contribution of power associates. SN Aboitiz Power-Magat, Inc. (SNAP-Magat) and SN Aboitiz Power-Benguet, Inc. (SNAP-Benguet) reported sharp decrease in ancillary service revenue at the back of lower acceptance rate by the NGCP. Said decrease was partially made up by the increase in the Group’s share of UBP’s income. Said improvement was attributed to the growth in UBP net income and the increase in AEV’s ownership in UBP from 44.8% to 47.4%. Other income declined by 77% YoY (P541.5 million vs P2.35 billion in 2013) mainly due to foreign exchange (FX) losses (P1.99 billion losses vs P1.62 billion gains in 2012), resulting from the restatement of the dollar-denominated debt of the power group under a depreciating peso scenario as of the end of the current period, vis-à-vis an appreciating peso scenario as of end of 2012. This decrease was partially countered by the P1.3 billion gain generated from the sale of CSB shares by AEV and PILMICO during the period in review. The 54% decrease in provision for income tax (P887 million vs P1.91 billion in 2012) was mainly due to the P898 million deferred tax benefits recognized on the unrealized foreign exchange losses and Net Operating Loss Carryover (NOLCO) recorded by the power group. This was in contrast to the P358 million deferred tax provision that was set up on the unrealized foreign exchange gains generated in 2012. This decline in tax provision was partially offset by the higher income and final taxes reported during the current year, from P1.55 billion in 2012 to P1.78 billion. The 16% YoY decline in net income attributable to non-controlling interests was largely due to the decrease in power group’s net income, 23% of which belongs to minority shareholders. AEV’s consolidated comprehensive income attributable to equity holders decreased by 27%, from P23.31 billion in 2012 to P16.98 billion in 2013. This was mainly due to the 1538% increase (P4.25 billion vs P259 million in 2012) in AEV’s share of the unrealized mark-to-market losses on the AFS investments of its banking associate. Changes in Registrant’s Resources, Liabilities and Shareholders’ Equity Assets Compared to year-end 2012 level, consolidated assets increased 11% to P247 billion as of December 31, 2013, due to the following:

a. Cash & Cash Equivalents increased by 7% (P36.12 billion vs P33.73 billion as of

December 31, 2012) mainly due to the Company’s unspent portion of the funds raised from its retail bond issuance in November 2013.

b. Inventories increased by 50% (P8.76 billion vs P5.82 billion in December 2012)

substantially due to the first-time consolidation of Lima Land and VECO inventories amounting to P2.15 billion and P498 million, respectively.

c. Derivative asset increased by P28 million (P31 million vs P3 million as of December

31, 2012) due to the mark-tomarket gains recognized during the current period by certain power subsidiaries on their swap contracts and other hedging instruments.


d. Other Current Assets increased by 57% (P3.90 billion vs P2.48 billion as of December 31, 2012) due to the buildup of input VAT resulting from the rehabilitation works done on certain power plants and barges in 2013.

e. Gross of depreciation expense, the resulting P27.23 billion combined increase in

Property, Plant and Equipment (PPE) and Land and Improvements (LI) was mainly due to the following: 1.) P1.65 billion rehabilitation of geothermal power plant and power barges; 2.) P14.29 billion on-going construction of Davao coal and Tudaya hydro power plants; 3.) P2.28 billion capital expenditures spent by the rest of the subsidiaries; 4.) P2.01 billion increase in PPE equivalent to the asset retirement obligation recognized by APRI starting 2013; and 5.) first-time consolidation of VECO and Lima Land assets valued at P5.90 billion and P1.10 billion, respectively.

f. Deferred Income Tax Assets increased by 128% (P610 million vs P268 million as of

December 31, 2012) mainly due to the corresponding deferred tax benefit recognized on the unrealized foreign exchange losses and NOLCO generated by the power group during the current period.

g. Other Noncurrent Assets (ONCA) increased by 50% (P8.37 billion vs P5.57 billion as

of December 31, 2012) due to the P1.65 billion build-up of deferred input VAT by the power group arising from the ongoing construction of its coal power plant, and the P3.05 billion franchise recognized in 2013 resulting from the consolidation of VECO. Said increase was partially countered by the P1.97 billion decrease attributed to the reclassification of advances to contractors. These advances, which were recorded under ONCA upon payment in 2012, were reclassified to PPE in 2013.

The above increases were tempered by the following decreases:

a. Trade and Other Receivables, inclusive of non-current portion, decreased by 29%

(P17.53 billion vs P24.64 billion as of December 31, 2012) mainly due to the deconsolidation of CSB’s loans receivable amounting to P13.33 billion. This decrease was partially offset by the P6.23 billion increase in the Group’s receivables resulting from the consolidation of VECO and Lima Land accounts and the increase of power generation subsidiaries’ trade receivables.

b. Investments in and Advances to Associates decreased by P610 million (P47.91

billion vs P48.52 billion as of December 31, 2012) mainly due to 1.)recognition of P4.2 billion share of a banking associate’s mark-to-market losses on its AFS investments; 2.) collection of P6.21 billion cash dividends from associates; and 3.) elimination of P1.03 billion gain on the sale of CSB (ie, elimination was booked as a decrease in the carrying value of UBP investment). This decrease was partially offset by the P2.04 billion purchase of UBP shares and the recording of P10.60 billion share in earnings of associates.

c. Available-for-Sale (AFS) Investments decreased by 13% (P65 million vs P74 million in

December 2012) mainly due to the sale of certain AFS investments.

d. Pension Asset decreased by 51% (P100 million vs P203 million in December 2012) due to accrual of defined benefit expense and recognition of additional actuarial losses on the defined benefit plans of subsidiaries during the current period.

e. Goodwill decreased by 19% or P305 million (P1.33 billion vs P1.64 billion as of

December 31, 2012) due to the de-consolidation of CSB’s accounts from the Group’s financial statements. The Dec. 31, 2012 carrying value of the investment in CSB included a P644 million goodwill which had to be de-consolidated upon sale of said investment in 2013. Impairment of goodwill amounting to P369 million on the investment in MEZ was also recognized in 2013. These were partly offset by


increases attributed to the P708 million goodwill recognized from the Lima Land acquisition and VECO step acquisition.

Liabilities Consolidated short-term bank loans reduced by 40% (P3.96 billion vs π6.59 billion in December 2012) while long-term liabilities increased by 16% (P91.67 billion vs P78.74 billion as of December 31, 2012). The decrease in short-term loans was mainly due to the repayments made by food and power groups. The P12.93 billion rise in long-term debt was due to P20.78 billion new loans of the power group, P8.0 billion bond issue of AEV and P767 million increase in power group’s finance lease obligation resulting from the restatement of the foreign-denominated portion of the debt under a depreciating peso scenario. Said increase was partially offset by the 1.) pretermination of P9.1 billion AEV, AP and PILMICO fixed-rate notes, and of P3.0 billion Hedcor Sibulan long-term loan; 2.) de consolidation of CSB’s P4.2 billion long-term loans; and 3.) amortization payments amounting to P322 million on existing loans and on a payable to a preferred shareholder of a subsidiary. Trade and other payables and deposit liabilities, inclusive of noncurrent portion, were lower by 5%, from P20.02 billion to P18.96 billion, mainly due to the de-consolidation of CSB’s deposit liabilities and accounts payable amounting to P5.43 billion and P3.14 billion, respectively. This was partly offset by increases attributed to power generation subsidiaries’ trade payables which rose by P4.05 billion, the P960 million spike in trade payables of the rest of the subsidiaries, and the consolidation of VECO’s payables amounting to P2.50 billion. Income tax payable increased by 107%, from P214 million to P444 million, due to the recording of the additional income tax liability for the current period as a result of the growth in taxable net income. Derivative liabilities decreased by 100%, from P29 million to P23 thousand, due to the mark-to-market gains recognized during the current period by certain power subsidiaries on their swap contracts and other hedging instruments. Customer deposits were higher by 117%, from P2.49 billion to P5.42 billion, mainly due to the consolidation of VECO’s accounts totalling P1.95 billion and the growth in the customer base of the rest of the power distribution subsidiaries. Asset retirement obligation (ARO) with a balance of P2.01 billion as of the end of the current year is a new account set up by APRI in 2013, with PPE as the contra account. It is the long-term liability recognized by APRI on its obligation to decommission, abandon and perform surface rehabilitation on steam field assets upon abandonment of the plant. The amount of the ARO recorded in 2013 represents the present value of the estimated costs that APRI will incur in the future in performing said obligation. Pension liability increased by 224%, from P217 million to P705 million, on account of accrual of defined benefit expense and recognition of additional actuarial losses on the defined benefit plans of subsidiaries during the current period. Deferred income tax liabilities (DTL) increased by 18%, from P1.16 million to P1.37 billion, mainly due to the P914 million DTL set up in 2013 related to the first-time recording of the P3.05 billion VECO franchise. The increase was partially offset by the P704 million reversal of some deferred tax provision booked in previous years resulting from the unrealized foreign exchange losses recognized during the period in review. Equity Equity attributable to equity holders of the parent increased by 6% from year-end 2012 level of P91.09 billion to P96.93 billion, mainly due to the following: a.) P9.98 billion increase in Retained Earnings resulting from the P21.03 billion net income recorded during the current period, reduced by the P11.04 billion cash dividends paid; and b.) P471 million increase in current translation


adjustments recorded by investees using US dollars as functional currency. This was partially countered by the P4.25 billion share in a banking associate’s unrealized mark-to market losses on its AFS investments, and the P270 million net increase in actuarial losses on the defined benefit plans of subsidiaries and associates. Material Changes in Liquidity and Cash Reserves of Registrant For the year ended 2013, the Group continued to support its liquidity mainly from cash generated from operations, additional loans availed and dividends received from associates. Compared to the cash inflow in 2012, consolidated cash generated from operating activities in 2013 decreased by P455 million to P25.02 billion, mainly due to the lower earnings before interest, depreciation and amortization (EBITDA) recorded by subsidiaries during the current period and the higher funds used in purchasing additional real estate inventory. The current period ended up with P12.32 billion net cash used in investing activities, compared to P1.56 billion last year. This was mainly due to lower cash dividends received from associates, and higher funds used in the purchase of additional UBP shares and ongoing plant constructions and rehabilitation works. This was partly offset by the net proceeds generated from the sale of CSB investment in the current period. Net cash used in financing activities was lower at P10.35 billion, versus P19.69 billion in 2012. This decrease was attributed to the net debt availment in 2013, vis-a-vis net debt prepayment in 2012. The higher loan proceeds raised in 2013 more than offset the increase in finance lease amortization payments and cash dividend distribution made during the current year. For the period in review, net cash inflows surpassed cash outflows, resulting in a 7% increase in cash and cash equivalents, from P33.73 billion as of year-end 2012 to P36.12 billion as of December 31, 2013. Financial Ratios Backed by strong operating cash inflows, liquidity was adequately preserved. Cash and cash equivalents stood at P36.12 billion as of December 31, 2013 while current liabilities dipped by 3%, keeping current ratio healthy at 2.64:1. Debt-to-equity rose to 1.02:1 (versus year-end 2012’s 0.97:1) while net debt-to-equity ratio was at 0.48x (versus year-end 2012’s 0.45x). The increase in debt-to-equity ratio was mainly due to the substantial increase in total liabilities along with a rise in equity.

Year ended December 31, 2012 vs. Year ended December 2011

The following discussion and analysis of the financial condition and results of operations of Aboitiz Equity Ventures, Inc. (AEV or the Company or the Parent Company) and its subsidiaries should be read in conjunction with the consolidated financial statements and accompanying schedules and disclosures set forth elsewhere in this report.

Top Five Key Performance Indicators Management uses the following indicators to evaluate the performance of the registrant and its subsidiaries:


KEY PERFORMANCE INDICATORS (Amounts in thousands except financial ratio data)

JAN-DEC 2012

(As restated) JAN-DEC 2011

(As restated)

EQUITY IN NET EARNINGS OF INVESTEES 13,322,144 11,242,828

EBITDA 40,870,873 38,979,015

CASH FLOW GENERATED: Net cash provided by operating activities 25,473,439 23,627,500 Net cash used in investing activities (1,551,918) (5,850,648) Net cash used in financing activities (19,693,620) (14,333,987) Net Increase in cash & cash equivalents 4,227,901 3,442,865 Cash & cash equivalent, beginning 29,543,492 26,097,203 Cash & cash equivalent, end 33,730,531 29,543,492

CURRENT RATIO 2.57 2.96 DEBT-TO-EQUITY RATIO 0.97 1.12

DESCRIPTION OF KEY PERFORMANCE INDICATORS: 1. EQUITY IN NET EARNINGS OF INVESTEES

Equity in net earnings (losses) of investees represents the group’s share in the undistributed earnings or losses of its associates for each reporting period subsequent to acquisition of said investment, net of goodwill impairment cost, if any. Goodwill is the difference between the purchase price of an investment and the investor’s share in the value of the net identifiable assets of investee at the date of acquisition. Equity in net earnings (losses) of investees indicates profitability of the investments and investees’ contribution to the Group’s consolidated net income. Manner of Computation: Investee’s Net Income (Loss) x Investor’s % ownership - Goodwill Impairment Cost.






4. CURRENT RATIO




DISCUSSION ON KEY PERFORMANCE INDICATORS: As can be gleaned from the resulting KPI values, 2012 is another outstanding year for the Group in terms of operating performance and financial stability. During the year in review, management teams of the different businesses continued to effectively handle their respective operations and financial requirements. As a result, profitability was sustained and financial position remained strong. Equity in net earnings of investees registered an 18.5% year-on-year (YoY) increase, mainly attributed to the stellar performance of UBP and the majority of the power associates. This growth in income contribution by associates more than compensated for the flat operating profits of subsidiaries, and drove consolidated EBITDA up by 5%. The rise in consolidated EBITDA translated into increased cash inflows from subsidiaries’ operations and higher dividend collection from associates. The internally-generated funds were then used to finance capital expenditures, prepay debt, and distribute cash dividends to stockholders. Despite the level of spending during the current year, the Group was able to maintain a strong and liquid financial position with a higher cash balance of P33.73 bn at year-end. Debt-to-equity ratio improved to 0.97x (versus end-2011’s 1.12x), while current ratio stood at 2.57x. Review of January - December, 2012 Operations vs January - December, 2011 Results of Operations For the year 2012, AEV and its subsidiaries posted a consolidated net income of P23.96 bn, a 13% YoY increase. This translates to an earnings per share of P4.34. In terms of income contribution, power group still accounted for the lion’s share at 78%, followed by the banking and food groups at 16% and 5%, respectively. The Group generated a non-recurring net gain of P541 mn (versus P366 mn in 2011), which comprised the following: (1) P1,065 mn share of power group’s net foreign exchange gains from the revaluation of dollar-denominated loans and placements; (2) P11 mn share of AP’s gain from the redemption of preferred shares by certain associates; (3) P183 mn share of a power subsidiary’s reimbursement of cost to its steam supplier; (4) P202 mn share of a power subsidiary’s downward revenue adjustment as a result of an ERC ruling regarding its ancillary service contract; and (5) P150 mn share of AP’s debt prepayment fees. Stripping out the above one-off items, the Group’s core net income for the current year amounted to P23.42 bn, up 12% YoY.


Business Segments The individual performance of the major business segments is discussed as follows: Power Aboitiz Power Corporation (AP or AboitizPower) and its subsidiaries ended the current year with an income contribution of P18.77 bn, a 14% increase from last year’s P16.50 bn. AP’s generation group reported a 12% YoY increase in earnings contribution to AEV, from P15.61 bn to P17.49 bn, attributed to the higher average selling prices and net generation recorded during the year under review. As compared to 2011 levels, average selling prices rose by 3% as spot market prices improved amid surge in demand for electricity due to warmer climate, and curtailment in supply resulting from higher plant outages in the Luzon grid. Likewise, the group’s attributable net generation grew by 13%, from 9,422 GWh to 10,660 GWh, resulting from the 17% expansion of sales made through bilateral contracts. On a capacity basis, the group’s attributable sales increased by 9% YoY to 1,547 MW, at the back of rising capacity sales through bilateral contracts. This spike in power sales more than made up for the 19% decrease in ancillary service revenue mainly resulting from the lower acceptance rate of the grid operator. AP’s distribution group also registered a 19% YoY rise in earnings contribution to AEV, from P1.83 bn to P2.17 bn. Driving this growth was the 6% YoY expansion in attributable electricity sales, from 3,727 GWh to 3,934 GWh, mainly coming from the 6% increase in the power consumption of industrial customers, with residential and commercial sectors posting growth rates of 5% and 3%, respectively. Higher selling prices attributed to the implementation of the rate increase under a Performance Based Regulation (PBR) scheme, and lower systems loss as a result of the initiatives implemented during the current period, further improved the group’s profit margins. Financial Services Income contribution from the financial services group grew by 12%, from last year’s P3.44 bn to P3.85 bn. Union Bank of the Philippines (UBP or UnionBank) ended the current period with an earnings contribution of P3.33 bn, an increase of 14% YoY, while City Savings Bank, Inc.’s (CSB or CitySavings) share in earnings was P520 mn, down 2% YoY. UBP’s full-year 2012 net income was higher at P7.58 bn (vs P6.60 bn in 2011) mainly due to the 13% YoY increase (P10.83 bn vs P9.56 bn) in non-interest income on the back of hefty trading gains. This improvement was boosted by the 5% growth (P7.31 bn vs P6.98 bn) in net interest income, due largely to the 25% drop in interest expense resulting from the decline in average levels of high cost deposits. The over-all increase in revenue was partially offset by the 6% rise in operating expenses, from last year’s P8.18 bn to P8.67 bn. The 2% YoY decrease in CSB’s net income, from P535 mn to P523 mn, was attributed to the bank’s ongoing expansion program which caused the 28% YoY increase in operating expenses. Said increase outpaced the 6% growth in net interest income resulting from the higher level of loan releases during the year. Food Income contribution from Pilmico Foods Corporation (PFC or Pilmico) and its Subsidiaries amounted to P1.30 bn, up 5% YoY, mainly attributed to the increase in profit margins of flour and swine businesses. The improvement was due to rise in sales resulting from higher average selling prices and sales volume for flour, and higher sales volume for swine. This growth was partially offset by the decline in margins of feed division owing to softer prices and an uptick in input costs.


Material Changes in Line Items of Registrant’s Statements of Income and Comprehensive Income For the period ended December 31, 2012, consolidated net income allocable to the equity holders of AEV registered a 13% growth, reaching P23.96 bn from P21.24 bn posted in the previous year. Operating profit for the current year remained flat at P22.9 bn, mainly attributed to the performance of the power group. AP and its subsidiaries reported a flattish growth in operating margins as the P7.68 bn increase in revenues slightly more than covered the P7.60 bn rise in costs and expenses. Consolidated revenues increased to P62.15 bn (vs P54.48 bn in 2011) substantially due to higher average selling prices and GWh sold. For the generation subsidiaries, the expansion in revenues was due to improvement in spot market prices and increase in contracted sales. For the distribution subsidiaries, it was due to higher consumption by customers and better selling prices from the implementation of the rate increase under a PBR scheme. Meanwhile, consolidated costs and expenses amounted to P41.72 bn, 22% more than the P34.12 bn incurred in 2011, mostly resulting from increase in fuel costs of AP Renewables, Inc. (APRI), Therma Luzon, Inc. (TLI) and Therma Marine, Inc. (TMI). The P2.08 bn increase in the earnings contribution of associates, which more than compensated for the break-even performance of the Subsidiaries, pulled up the Group’s over all profitability. Share in net earnings of associates grew by 18.5% YoY (P13.32 bn vs P11.24bn in 2011) due to the strong performance of UBP and the majority of the power associates. Bulk of the increase was coming from the substantial income contributions of UBP, SN Aboitiz Power - Magat, Inc. (SNAP-Magat), SN Aboitiz Power - Benguet, Inc. (SNAP-Benguet), Cebu Energy Development Corporation (CEDC), and Visayan Electric Company, Inc. (VECO). Improvement in UBP’s net income was a result of higher net interest income and trading gains. The spike in SNAP-Magat’s and SNAP-Benguet’s bottomlines was due to significant rise in power sales. Likewise, the upsurge in the income contributions of CEDC and VECO was attributed to higher revenues as CEDC’s contracted sales increased and VECO’s MWh sales expanded by 8.5%, complemented by better selling rates. The decrease in net interest expense and increase in other income further enhanced the growth in the Group’s consolidated net income for the year in review. The 5% YoY drop in net interest expense (P6.56 bn vs P6.89 bn in 2011) was attributed to lower level of long-term debt resulting from the pre-termination of loans in 2012. Other income rose by 124% YoY substantially due to higher foreign exchange (FX) gains (P1.67 bn vs P12 mn in 2011). This was the result of the restatement of the dollar-denominated debt of the power group under an appreciating peso scenario as of year-end 2012, vis-a-vis the nil FX differential in previous year. As of December 31, 2012, exchange rate for the US$ stood at P41.05 to a dollar, a P2.79 decline from the P43.84 rate at the start of the year. In contrast, prior year reported a no change scenario when December 31, 2011 FX rate was at P43.84, exactly the same rate as of the beginning of that year. The 9% increase in provision for income tax (P1.91 bn vs P1.75 bn in 2011) was mainly due to the higher deferred tax provisions booked by the power group. This is related to the write-off of expiring unused deferred tax assets. The 14% YoY rise in net income attributable to minority interests was largely due to the increase in power group’s net income, 23% of which belongs to minority shareholders. AEV’s consolidated comprehensive income attributable to equity holders correspondingly rose by 9%, from P21.35 bnin 2011 to P23.31bn in 2012. The 13% increase in consolidated net income, which was partially offset by the 269% YoY decline in AEV’s share of the fair valuation differential and cumulative translation adjustments of associates, accounted for this improvement.


Changes in Registrant’s Resources, Liabilities and Shareholders Equity Assets Compared to year-end 2011 level, consolidated assets increased 11% to P222.46 bn as of December 31, 2012, due to the following:

a. Cash & Cash Equivalents increased by P4.19 bn mainly due to the excess internally-

generated funds left, after spending for various capital expenditures, debt servicing and prepayments, and cash dividend distribution.

b. Trade and Other Receivables, inclusive of non-current portion, increased by 12%

(P24.64 bn vs P22.02 bn in December 2011) mainly due to higher loan releases of the banking subsidiary, and the first-time consolidation of Aboitiz Land, Inc.’s (AboitizLand) receivable accounts amounting to P940 mn.

c. Inventories increased by 18% (P5.82 bn vs P4.93 bn in December 2011) substantially

due to the first-time consolidation of AboitizLand’s real estate inventories worth P792 mn.

d. Derivative asset increased by P3 mn (P3 mn vs nil in December 2011). This account

represents the mark-tomarket gains generated by a power subsidiary on its outstanding non-deliverable forward contracts.

e. Other Current Assets increased by 12% (P2.48 bn vs P2.22 bn in December 2011)

mainly due to the first-time consolidation of AboitizLand’s accounts amounting to P222 mn, which consist mostly of unapplied prepaid taxes.

f. Gross of depreciation expense, the resulting P13.18 bn increase in Property Plant

and Equipment (PPE) and Land and Improvements (LI) was mainly due to the following: (i) rehabilitation of geothermal power plant and power barges; (ii) on-going construction of Davao coal and Tudaya hydro power plants; (iii) various capital expenditures of power and food groups; and (iv) first-time consolidation of AboitizLand’s assets totalling P5.35 bn consisting of PPE and LI valued at P162 mn and P1.58 bn, respectively.

g. Investment Properties increased by P3.67 bn (P4.01 bn vs P341 mn in December

2011) substantially due to the first-time consolidation of AboitizLand’s properties valued at P3.61 bn.

h. Pension Asset increased by 86% (P203 mn vs P109 mn in December 2011)

principally due to the retirement contributions made by certain subsidiaries during the current period.

i. Other Noncurrent Assets increased by 32% (P5.57 bn vs P4.22 bn in December

2011) mainly due to the additional VAT inputs generated by certain power subsidiaries.

The above increases were tempered by the following: a.) 11% YoY decrease in Intangible Asset – Service Concession Right due to the amortization cost recorded during the current year; and b.) 22% YoY decline in Deferred Income Tax Assets (DTA) resulting from AP parent’s write-off of DTA related to expiring NOLCO and minimum corporate income tax (MCIT). Liabilities

Consolidated short-term bank loans grew by 24% (P6.59 bn vs P5.3 bn in December 2011) while long-term liabilities declined by 2% (P78.74 bn vs P80.74 bn in December 2011). The increase in short-


term loans was mainly due to the P2.2 bn loan availed by the Company to partially finance its purchase of AboitizLand shares in November, 2012, reduced by the repayments made by food and power groups. The P2.0 bn decrease in long-term debt was due to the P7.74 bn pretermination of AP bonds and fixed-rate notes, P1.39 bn amortization payments on existing loans, and P17 mn amortization payment on a payable to a preferred shareholder of a Subsidiary. Said decrease was substantially countered by the following: a.) P4.11 bn new loan availments; b.) P1.66 bn rise in finance lease obligation resulting from interest accretion; and c.) first-time consolidation of AboitizLand debt amounting to P1.38 bn. Trade and other payables and deposit liabilities, inclusive of noncurrent portion, were higher by 17%, from P17.14 bn to P20.02 bn, mainly due to the following: a.) power group’s rise in payables to suppliers as a result of ongoing plant constructions and rehabilitation works; b.) banking subsidiary’s growth in deposits; and c.) first-time consolidation of AboitizLand’s payables worth P848 mn. Pension liability decreased by 17%, from P261 mn to P217 mn, on account of retirement contributions made by certain subsidiaries during the current period. Customer deposits were higher by 15%, from P2.17 bn to P2.49 bn, mainly due to the growth in the customer base of power distribution Subsidiaries. Derivative liabilities increased by 285%, from P7.58 mn to P29 mn, due to the mark-to-market loss recognized by a power subsidiary on its interest rate swap contract. Deferred income tax liabilities rose by 191%, from P398 mn to P1.16 bn, mainly due to the set up of the corresponding income tax provision on the unrealized foreign exchange gains booked during period in review. Equity

Equity attributable to equity holders of the parent grew by 19% from year-end 2011 level of P76.67 bn to P91.09 bn, mainly due to the following: (a) P15.2 bn increase in Retained Earnings, resulting from the P23.96 bn net income recorded during the current year, reduced by the P8.72 bn cash dividends paid; and (b) new account recorded with a balance of P469 mn representing the excess of book value over acquisition cost of the AboitizLand shares bought by AEV in 2012. This increase was partially offset by the recognition of the following: (a) P266 mn share in a banking associate’s unrealized fair valuation loss on its AFS investments; (b) P319 mn share of current translation adjustments recorded by power generation associates using US dollars as functional currency; and (c) P639 mn acquisition of non-controlling interest by AEV parent in its additional purchase of AP shares in 2012. Material Changes in Liquidity and Cash Reserves of Registrant For the year ended 2012, the Group continued to support its liquidity mainly from cash generated from operations and dividends received from associates. Compared to the cash inflow in 2011, consolidated cash generated from operating activities in 2012 increased by P1.85 bn to P25.47 bn, mainly due to the higher EBITDA recorded by Subsidiaries and lesser funds used in purchasing inventories during the current year. Net cash used in investing activities reached P1.55 bn, 73% lower than the P5.85 bn spent during the previous year. This decrease was mainly due to the increase in cash dividends collected from associates in 2012, partially offset by the higher funds utilized in acquiring AboitizLand shares and financing various capital expenditures.

Net cash used in financing activities was higher at P19.69 bn, compared to P14.33 bn in 2011. This increase was attributed to higher debt prepayments and repayments made in 2012, as against last year.


For the period in review, net cash inflows surpassed cash outflows, resulting in a 14% increase in cash and cash equivalents, from P29.54 bn as of year-end 2011 to P33.73 bn as of December 31, 2012. Financial Ratios Backed by strong operating cash inflows, liquidity was adequately preserved. Cash and cash equivalents stood at P33.73 bn as of December 31, 2012, keeping current ratio at the same high level of 2.57:1. Debt-to-equity improved to 0.97:1 (versus yearend 2011’s 1.12:1), as growth in equity outpaced the increase in total liabilities. Likewise, net debt-to-equity ratio was better at 0.45x (versus year-end 2011’s 0.59x) as decrease in net debt complemented the rise in equity. Item 7. Financial Statements

The audited consolidated financial statements of AEV are incorporated herein by reference. The schedules listed in the accompanying Index to Supplementary Schedules are filed as part of this SEC Form 17-A.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

AEV has engaged the services of SyCip Gorres Velayo & Co. (SGV) during the two most recent fiscal years. There were no disagreements with SGV on any matter of accounting principles or practices, financial statement disclosures or auditing scope or procedure.

Information on Independent Public Accountant The accounting firm of SGV has been AEV’s Independent Public Accountant for the last 21 years. Ms. Leovina Mae V. Chu is AEV’s current audit partner, and has served as such since 2012. AEV complies with the requirements of Section 3(b) (ix) of SRC Rule 68 on the rotation of external auditors or signing partners and the two-year cooling-off period. Representatives of SGV will be present during the Annual Stockholders’ Meeting and will be given the opportunity to make a statement if they so desire. They are also expected to respond to appropriate questions if needed. In its regular meeting on February 26, 2015, the AEV Board Corporate Governance Committee approved the inclusion in the agenda of the 2015 Annual Stockholders’ Meeting, a proposal to delegate to the Board of Directors the authority to appoint the Company’s external auditor. The proposal was intended to give the Board Audit Committee sufficient time to evaluate the different auditing firms that have submitted engagement proposals to act as AEV’s external auditor for 2015. As a matter of policy, the Board Audit Committee makes recommendations to the Board of Directors concerning the choice of external auditor. Ret. Justice Jose C. Vitug is the Chairman of the Board Audit Committee. The members are Messrs. Raphael P.M. Lotilla, Stephen T. CuUnjieng, Roberto E. Aboitiz and Justo A. Ortiz. External Audit Fees and Services The external audit and consultancy fees of the Registrant for the years 2014 and 2013 were as follows:

Fee Type Year ended December 31, 2014

Year ended December 31, 2013

Audit Fees P409,248.00 P389,76,.00 Audit-Related Fees - - Tax Fees - - Consultancy Fees P1,948,236.00 P896,000.00

Total P2,357,484.00 P1,285,760.00


As a policy, the Board Audit Committee makes recommendations to the Board of Directors concerning the choice of external auditor and pre-approves audit plans, scope and frequency before the audit is conducted. Audit services of external auditors for the years 2014 and 2013 were pre-approved by the Board Audit Committee. The Committee had also reviewed the extent and nature of these services to ensure that the independence of the external auditors is preserved.

PART III – CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Issuer

(a) (1) Directors for 2014-2015

Below is a list of AEV’s directors for 2014-2015 with their corresponding positions and offices held in the past five years. The directors assumed their directorship during AEV’s Annual Stockholders’ Meeting in 2014 for a term of one year.

JON RAMON ABOITIZ Chairman – Board of Directors Chairman – Board Corporate Governance Committee Member – Board Risk and Reputation Management Committee

Mr. Jon Ramon Aboitiz, 66 years old, Filipino, has served as Chairman of the Board of Directors of AEV since January 2009. He was President/ Chief Executive Officer of AEV since 1994 until his retirement in December 2008. Mr. Aboitiz began his career with the Aboitiz Group in 1970. From a manager of Aboitiz Shipping Corporation, Mr. Aboitiz was promoted to President in 1976 and was President of Aboitiz & Company, Inc. (ACO) in 1991 until 2008. He is currently Chairman of the Board of Directors of ACO; Vice Chairman of Aboitiz Power Corporation (AboitizPower); and Director of Cotabato Light & Power Company (Cotabato Light), Davao Light & Power Company, Inc. (Davao Light), Bloomberry Resorts Corporation, International Container Terminal Services, Inc. (ICTSI), and Sociedad Puerto Industrial del Aguadulce S.A. (SPIA). Mr. Aboitiz is also Vice Chairman of the Board of Directors of Union Bank of the Philippines (UnionBank). He is Chairman of UnionBank’s Executive Committee, Risk Management Committee and Vice Chairman of the Corporate Governance Committee, including the latter’s Compensation Remuneration and Nomination Sub- Committees. He is Trustee and Vice President of Ramon Aboitiz Foundation, Inc. (RAFI); Trustee of Santa Clara University and Philippine Business for Social Progress (PBSP); member of the Board of Advisors of The Coca-Cola Export Corporation (Philippines) and Pilipinas Kao, Inc.; and Trustee of the Association of Foundations. Mr. Aboitiz holds a Bachelor of Science degree in Commerce, major in Management from the Santa Clara University, California, U.S.A. He is not connected with any government agency or instrumentality. ERRAMON I. ABOITIZ Director President & Chief Executive Officer Member – Board Risk and Reputation Management Committee

Mr. Erramon I. Aboitiz, 58 years old, Filipino, has served as President & Chief Executive Officer of AEV since January 2009. He has been a Director of AEV since 1994 and was its Executive Vice President and Chief Operating Officer from 1994 to December 2008. He is also President and Chief Executive Officer of ACO; Chief Executive Officer of AboitizPower; Chairman of the Board of Directors of Davao Light, San Fernando Electric Light and Power Co., Inc. (SFELAPCO), Cotabato Light, Subic EnerZone Corporation (SEZ), SN Aboitiz Power-


Magat, Inc. (SN Aboitiz Power-Magat), SN Aboitiz Power-Benguet, Inc. (SN Aboitiz Power-Benguet), Aboitiz Renewables, Inc. (ARI), Therma Power, Inc. (TPI) and Aboitiz Land, Inc. (AboitizLand); and Director of UnionBank, Pilmico Foods Corporation (Pilmico), and Redondo Peninsula Energy, Inc. (RP Energy). He is also Chairman of Aboitiz Foundation, Inc. (Aboitiz Foundation), and a Director of the Family Business Development Center (Ateneo de Manila University) and the Philippine Disaster Recovery Foundation. He holds a Bachelor of Science degree in Business Administration, major in Accounting and Finance, from Gonzaga University, Spokane, Washington, U.S.A. He is not connected with any government agency or instrumentality. ROBERTO E. ABOITIZ Director Member – Board Audit Committee – Board Corporate Governance Committee

Mr. Roberto E. Aboitiz, 65 years old, Filipino, has served as Director of AEV since 1994 and has been a member of the Board Audit Committee of AEV since 2006. He served as Chairman of AEV from 2005 until December 2008. He is Vice Chairman of ACO; Director of Tsuneishi Heavy Industries, (Cebu), Inc. (THI), Cotabato Light and Davao Light; Chairman and President of RAFI and West Cebu People Solutions, Inc. (WCPSI). He is Chairman of Sacred Heart School - Ateneo de Cebu and Co-Chairman of the Metro Cebu Development and Coordinating Board. He was Director of City Savings Bank, Inc. (CitySavings) from 1992 up to March 2013. He graduated from Ateneo de Manila University with a Bachelor of Arts degree in Behavioral Science. In 2008, he was conferred Doctor of Humanities (Honoris Causa) and Doctor of Science in Business Management (Honoris Causa). He is a recipient of the Perlas Award for Valuable Leader in Youth and Community Development. He is not connected with any government agency or instrumentality. ENRIQUE M. ABOITIZ Director Chairman – Board Risk and Reputation Management Committee

Mr. Enrique M. Aboitiz, 61 years old, Filipino, has served as Director of AEV since 1994. He is also the Chairman of the Board of Directors of AboitizPower and WeatherPhilippines Foundation, Inc. (WeatherPhilippines); and Director of ACO. Mr. Aboitiz graduated with a degree in Bachelor of Science in Business Administration, major in Economics, from Gonzaga University, Spokane, Washington, U.S.A. He is not connected with any government agency or instrumentality. JUSTO A. ORTIZ Director Member – Board Audit Committee – Board Risk and Reputation Management Committee

Mr. Justo A. Ortiz, 57 years old, Filipino, has served as Director of AEV since 1994 and has been a member of the Board Audit Committee since 2006. He is also Chairman and Chief Executive Officer of UnionBank, Vice Chairman of MegaLink, Director of Bankers Association of the Philippines, Member of Philippine Trade Foundation, Inc. and World Presidents Organization. Prior to his stint in UnionBank, he was Managing Partner for Global Finance and Country Executive for Investment Banking at Citibank N.A. He graduated magna cum laude with a degree in Economics from Ateneo de Manila University. He is not connected with any government agency or instrumentality.


ANTONIO R. MORAZA Director Mr. Antonio R. Moraza, 58 years old, Filipino, has been Director of AEV since 2009. He is currently AboitizPower’s President and Chief Operating Officer. He is also Chairman of the Board of Directors of Pilmico, Pilmico Animal Nutrition Corporation (PANC), East Asia Utilities Corporation (EAUC), Therma Visayas, Inc. (TVI), Therma Mobile, Inc. (TMO), Therma South, Inc. (TSI), Therma Marine, Inc. (TMI), Therma Luzon, Inc. (TLI), Luzon Hydro Corporation (LHC), Hedcor, Inc. (Hedcor), Hedcor Tudaya, Inc. (Hedcor Tudaya), Hedcor Sibulan, Inc. (Hedcor Sibulan), Cebu Private Power Corporation (CPPC), and AP Renewables, Inc. (APRI); and Vice Chairman of Cebu Energy Development Corporation (Cebu Energy). He is likewise Director and Senior Vice President of ACO; President and Chief Executive Officer of Abovant Holdings, Inc. (Abovant) and ARI; and Director of SN Aboitiz Power-Benguet, SN Aboitiz Power-Magat, Southern Philippines Power Corporation (SPPC), STEAG State Power, Inc. (STEAG Power), and Western Mindanao Power Corporation (WMPC). He is also Director and President of TPI and Manila-Oslo Renewable Enterprise, Inc. (MORE). He holds a degree in Business Management from Ateneo de Manila University. He is not connected with any government agency or instrumentality. JOSE C. VITUG Independent Director Chairman – Board Audit Committee Member – Board Corporate Governance Committee

Justice Jose C. Vitug (ret.), 80 years old, Filipino, has served as Independent Director of AEV since 2005 and has been a member of the Board Audit Committee of AEV since 2008. He is a Consultant of the Committee on Revision of the Rules of the Supreme Court of the Philippines; Chairman of the Angeles University Foundation Medical Center; Independent Director of ABS-CBN Holdings Corporation; Trustee of the Mission Communications Foundation, Inc.; Dean of the Angeles University Foundation School of Law, and a Graduate Professor of the Graduate School of Law of San Beda College. He was formerly an Associate Justice of the Supreme Court, Chairman of the House of Representatives Electoral Tribunal, and Senior Member of the Senate Electoral Tribunal. He is an accredited Professional Lecturer of the Philippine Judicial Academy.

STEPHEN T. CuUNJIENG Independent Director Member – Board Audit Committee – Board Corporate Governance Committee – Board Risk and Reputation Management Committee

Mr. Stephen T. CuUnjieng, 56 years old, Filipino, has served as Independent Director of AEV since 2010 and has been a member of the Board Audit Committee of AEV since 2011. He has a long and extensive experience in investment banking with a number of major international investment banks. He has led several high profile transactions in the Philippines and Asia and has won ten Deals of the Year awards since 2005. He is currently Chairman for Asia of Evercore Partners, an investment bank listed with the New York Stock Exchange; and Adviser to the Board of SM Investments Corporation. He previously held Vice Chairman, Managing Director and Director positions with Macquarie, Merrill Lynch and Salomon Brothers, among others. He graduated from Ateneo de Manila University and also has an Ll.B (with honors) from Ateneo School of Law. He has an MBA from the Wharton School of the University of Pennsylvania, U.S.A. He is not connected with any government agency or instrumentality.


RAPHAEL P.M. LOTILLA Independent Director Member – Board Audit Committee – Board Corporate Governance Committee

Mr. Raphael P.M. Lotilla, 56 years old, Filipino, has served as Independent Director of AEV since May 2012 and has been a member of the Board Audit Committee of AEV since 2012. He was the Executive Director of the Partnerships in Environmental Management for the Seas of East Asia, an inter-governmental regional organization. Mr. Lotilla also served the Philippine government in various capacities, as Department of Energy (DOE) Secretary from March 2005 to July 2007, President and Chief Executive Officer of Power Sector Assets and Liabilities Management Corporation (PSALM) from January 2004 to March 2005, and Deputy Director-General of National Economic and Development Authority from 1996 to 2004. Mr. Lotilla earned his degrees in Bachelor of Science in Psychology and Bachelor of Arts in History from the University of the Philippines, Diliman and finished his Bachelor of Laws from the same school. He holds a Master of Laws degree from the University of Michigan Law School, Ann Arbor, Michigan, U.S.A. He is a member of the Board of Trustees of the Philippine Institute for Development Studies.

Nominations for Independent Directors and Procedure for Nomination The procedure for the nomination and election of the Independent Directors is in accordance with Rule 38 of the Securities Regulation Code (SRC Rule 38), AEV’s Amended By-Laws and AEV’s Guidelines. The Guidelines were approved by the AEV Board on February 10, 2003 and disclosed to all stockholders. Nominations for Independent Directors were opened starting January 1, 2015, in accordance with Section 2 of the Guidelines, and the table for nominations was closed on February 15, 2015, in accordance with Section 3 of the Guidelines. SRC Rule 38 further requires that the Board Corporate Governance Committee meet to pre-screen all nominees and submit a Final List of Nominees to the Corporate Secretary so that such list will be included in the Company’s Preliminary and Definitive Information Statements. Only nominees whose names appear on the Final List shall be eligible for election as Independent Directors. No other nominations shall be entertained after the Final List of Candidates has been prepared. The name of the person or group of persons who nominates an Independent Director shall be identified in such report including any relationship with the nominee.

In approving the nominations for Independent Directors, the Board Corporate Governance Committee considered the guidelines on the nominations of Independent Directors prescribed in SRC Rule 38, the Guidelines and AEV’s Revised Manual on Corporate Governance. The Board Corporate Governance Committee took over the functions of the Board Nominations and Compensation Committee pursuant to an amendment in the Company’s Manual on Corporate Governance in 2009. The Chairman of the Board Corporate Governance Committee is Mr. Jon Ramon Aboitiz. The voting members are Messrs. Roberto E. Aboitiz, Raphael P.M. Lotilla, Stephen T. CuUnjieng and Ret. Justice Jose C. Vitug, while the ex-officio non-voting members are M. Jasmine S. Oporto and Mr. Xavier Jose Aboitiz. No nominations for Independent Director shall be accepted at the floor during the stockholders’ meeting at which such nominee is to be elected. However, Independent Directors shall be elected at the stockholders’ meeting during which other members of the Board are to be elected. Ret. Justice Jose C. Vitug, Mr. Stephen T. CuUnjieng and Mr. Raphael P.M. Lotilla are the nominees for Independent Directors of AEV. They are neither officers nor employees of the Company or any of its Affiliates, and do not have any relationship with the Company which


would interfere with the exercise of independent judgment in carrying out the responsibilities of an Independent Director. AEV stockholders, Jesusa Z. Nuñez, Rafael Sanvictores and Jovy Tan have nominated Ret. Justice Jose C. Vitug, Mr. Stephen T. CuUnjieng and Mr. Raphael P.M. Lotilla, respectively, as the Company’s Independent Directors. None of the nominating stockholders have any relation to Ret. Justice Vitug, to Mr. CuUnjieng and to Mr. Lotilla. Other Nominees for Election as Members of the Board of Directors

As conveyed to the Corporate Secretary, the following will also be nominated as members of the Board for the ensuing year 2015-2016:

Jon Ramon Aboitiz Erramon I. Aboitiz Roberto E. Aboitiz Enrique M. Aboitiz Justo A. Ortiz Antonio R. Moraza

Pursuant to Paragraph 4, Section 1, Article II of the Amended By-Laws of AEV, nominations for members of the Board other than Independent Directors for the ensuing year must be submitted in writing to the Corporate Secretary at least 15 working days prior to the regular Annual Stockholders’ Meeting on May 18, 2015, or not later than April 24, 2015. All other information regarding the positions and offices held by the above-mentioned nominees are integrated in Item 9.

Officers for 2014-2015

JON RAMON ABOITIZ Chairman – Board of Directors Chairman – Board Corporate Governance Committee Member – Board Risk and Reputation Management Committee

Mr. Jon Ramon Aboitiz, 66 years old, Filipino, has served as Chairman of the Board of Directors of AEV since January 2009. He was President/ Chief Executive Officer of AEV since 1994 until his retirement in December 2008. Mr. Aboitiz began his career with the Aboitiz Group in 1970. From a manager of Aboitiz Shipping Corporation, Mr. Aboitiz was promoted to President in 1976 and was President of Aboitiz & Company, Inc. (ACO) in 1991 until 2008. He is currently Chairman of the Board of Directors of ACO; Vice Chairman of Aboitiz Power Corporation (AboitizPower); and Director of Cotabato Light & Power Company (Cotabato Light), Davao Light & Power Company, Inc. (Davao Light), Bloomberry Resorts Corporation, International Container Terminal Services, Inc. (ICTSI), and Sociedad Puerto Industrial del Aguadulce S.A. (SPIA). Mr. Aboitiz is also Vice Chairman of the Board of Directors of Union Bank of the Philippines (UnionBank). He is Chairman of UnionBank’s Executive Committee, Risk Management Committee and Vice Chairman of the Corporate Governance Committee, including the latter’s Compensation Remuneration and Nomination Sub- Committees. He is Trustee and Vice President of Ramon Aboitiz Foundation, Inc. (RAFI); Trustee of Santa Clara University and Philippine Business for Social Progress (PBSP); member of the Board of Advisors of The Coca-Cola Export Corporation (Philippines) and Pilipinas Kao, Inc.; and Trustee of the Association of Foundations. Mr. Aboitiz holds a Bachelor of Science degree in Commerce, major in Management from the Santa Clara University, California, U.S.A. He is not connected with any government agency or instrumentality.


ERRAMON I. ABOITIZ Director President & Chief Executive Officer Member – Board Risk and Reputation Management Committee

Mr. Erramon I. Aboitiz, 58 years old, Filipino, has served as President & Chief Executive Officer of AEV since January 2009. He has been a Director of AEV since 1994 and was its Executive Vice President and Chief Operating Officer from 1994 to December 2008. He is also President and Chief Executive Officer of ACO; Chief Executive Officer of AboitizPower; Chairman of the Board of Directors of Davao Light, San Fernando Electric Light and Power Co., Inc. (SFELAPCO), Cotabato Light, Subic EnerZone Corporation (SEZ), SN Aboitiz Power-Magat, Inc. (SN Aboitiz Power-Magat), SN Aboitiz Power-Benguet, Inc. (SN Aboitiz Power-Benguet), Aboitiz Renewables, Inc. (ARI), Therma Power, Inc. (TPI) and Aboitiz Land, Inc. (AboitizLand); and Director of UnionBank, Pilmico Foods Corporation (Pilmico), and Redondo Peninsula Energy, Inc. (RP Energy). He is also Chairman of Aboitiz Foundation, Inc. (Aboitiz Foundation), and a Director of the Family Business Development Center (Ateneo de Manila University) and the Philippine Disaster Recovery Foundation. He holds a Bachelor of Science degree in Business Administration, major in Accounting and Finance, from Gonzaga University, Spokane, Washington, U.S.A. He is not connected with any government agency or instrumentality. STEPHEN G. PARADIES Senior Vice President/Chief Financial Officer/Corporate Information Officer Ex-Officio Member – Board Risk and Reputation Management Committee Mr. Stephen G. Paradies, 61 years old, Filipino, has been Senior Vice President/Chief Financial Officer and Corporate Information Officer of AEV since 2004. He is currently also Senior Vice President-Finance/ Treasurer and a member of the Board of Advisers of ACO; Director of Aboitiz Construction Group Inc. (ACGI), UnionBank, Union Properties, Inc., ICTSI, Pilmico, PANC, Metaphil International, Inc. (MII). Sureste Properties Inc. and WCPSI; Director and Vice President of AEV Aviation, Inc. (AEV Av), Trustee of Aboitiz Foundation and Bloomberry Foundation. He obtained his Bachelor of Science in Business Management degree from Santa Clara University, California, U.S.A. He is not connected with any government agency or instrumentality. MIKEL A. ABOITIZ Senior Vice President Mr. Mikel A. Aboitiz, 60 years old, Filipino, has been Senior Vice President of AEV since 2004. He was the Company’s Chief Strategy Officer from 2004-2012. He was formerly President and Chief Executive Officer of CitySavings from 2001-2014. He is Director of AboitizPower since 1998; Director and Senior Vice President of ACO; Vice Chairman of CitySavings, AboitizLand and Propriedad del Norte, Inc. (PDNI); Director of Cotabato Light, Davao Light, Pilmico, PANC, APRI, AEV Av, and TPI; and Trustee and Treasurer of RAFI. He obtained his Bachelor of Science in Business Administration degree from Gonzaga University, Spokane, Washington, U.S.A. He is not connected with any government agency or instrumentality.

JUAN ANTONIO E. BERNAD Senior Vice President Mr. Juan Antonio E. Bernad, 58 years old, Filipino, has been Senior Vice President of AEV since 1995. He was AEV’s Senior Vice President - Electricity Regulatory Affairs from 2004 to 2007 and Senior Vice President - Chief Financial Officer from 1995 to 2004. He is Executive Vice President for Strategy and Regulation of AboitizPower; Executive Vice President - Regulatory Affairs of Davao Light; Director and Senior Vice President of Visayan Electric Company, Inc. (VECO); and Director of Cotabato Light, AEV Av, and UnionBank. He has an Economics degree from Ateneo de Manila University and a Master’s degree in Business


Administration from The Wharton School of the University of Pennsylvania, U.S.A. He is not connected with any government agency or instrumentality.

XAVIER JOSE ABOITIZ Senior Vice President - Chief Human Resources Officer Ex-Officio Member - Board Corporate Governance Committee

Mr. Xavier Jose Aboitiz, 55 years old, Filipino, has been Senior Vice President – Chief Human Resources Officer of AEV since 2004. He is also Senior Vice President for Human Resources and a member of the Board of Advisers of ACO; Director of Pilmico and Davao Light; Director/President and Chief Executive Officer of Cebu Praedia Development Corporation (CPDC), and Trustee of Aboitiz Foundation. He was a Director of CitySavings from 2010 up to March 2013. Mr. Aboitiz has worked in various capacities in different companies of the Aboitiz Group since 1983. He took up Business Administration – Finance at Gonzaga University, Spokane, U.S.A. He is not connected with any government agency or instrumentality. GABRIEL T. MAÑALAC Senior Vice President – Group Treasurer

Mr. Gabriel T. Mañalac, 58 years old, Filipino, has been Senior Vice President – Group Treasurer of AEV since January 2009. He joined AEV as Vice President for Treasury Services in 1998 and was promoted to First Vice President for Treasury Services in 2004. He is also Vice President and Treasurer of Davao Light, and Treasurer of Cotabato Light. Mr. Mañalac graduated cum laude with a Bachelor of Science degree in Finance and a Bachelor of Arts in Economics degree from De La Salle University. He obtained his Masters of Business Administration in Banking and Finance degree from the Asian Institute of Management and was awarded the Institute’s Scholarship for Merit. He is not connected with any government agency or instrumentality. M. JASMINE S. OPORTO Senior Vice President - Chief Legal Officer/Corporate Secretary/Compliance Officer Ex-Officio Member - Board Corporate Governance Committee

Ms. M. Jasmine S. Oporto, 55 years old, Filipino, has been the Corporate Secretary of AEV since 2004 and Compliance Officer since November 2005. She is concurrently the Senior Vice President - Chief Legal Officer of AEV. She is also Vice President for Legal Affairs of Davao Light; Compliance Officer and Corporate Secretary of AboitizPower; Corporate Secretary of Hijos de F. Escaño, Inc. (Hijos) and Assistant Corporate Secretary of VECO. Prior to joining AEV, she worked in various capacities at the Hong Kong office of Kelley Drye & Warren, LLP, a New York-based law firm, and the Singapore-based consulting firm Albi Consulting Pte. Ltd. She obtained her Bachelor of Laws degree from the University of the Philippines and is a member of both the Philippine and New York bars. She is an Associate of the Institute of Corporate Directors. She completed the course for Corporate Governance and Risk Management for Board of Trustees/Directors of Banks conducted by the Bangko Sentral ng Pilipinas (BSP). She is not connected with any government agency or instrumentality. SUSAN V. VALDEZ Senior Vice President - Chief Reputation and Risk Management Officer Ex-Officio Member – Board Risk and Reputation Management Committee

Ms. Susan V. Valdez, 54 years old, Filipino, has been Senior Vice President - Chief Reputation and Risk Management Officer of AEV since July 2013. She was First Vice President - Chief Reputation Officer of AEV in September 2011. She is the Chief Reputation and Risk Management Officer of AboitizPower since December 2012. She is also President of Aboitiz


Foundation and WeatherPhilippines. Before joining AEV, she was the Executive Vice President and Chief Executive Officer of the 2GO Freight Division of Aboitiz Transport System (ATSC) Corporation (now 2GO Group, Inc.) for eight years. She was also President and Chief Executive Officer of Aboitiz One, Inc. (now ATS Express, Inc.) and Aboitiz One Distribution, Inc. (now ATS Distribution, Inc.) for two years. Prior to heading the freight and supply chain business of ATSC, she was its Chief Finance Officer and Chief Information Officer for eight years. She is a Certified Public Accountant, and graduated Cum Laude from St. Theresa’s College with a degree of Bachelor of Science in Commerce, major in Accounting. She earned her Masters degree in Business Management from the University of the Philippines, and completed a program on Management Development at Harvard Business School. She is not connected with any government agency or instrumentality. ROBERT McGREGOR Senior Vice President – Chief Strategy and Investment Officer Mr. Robert McGregor, 55 years old, British, has been Senior Vice President – Chief Strategy and Investment Officer of AEV since 2014. In May 2014, he was appointed as Senior Vice President - Chief Strategy Officer of the Company and on November 28, 2014, he was appointed as the Company’s Senior Vice President - Chief Strategy and Investment Officer. Mr. McGregor brings with him a wealth of experience in management, investment banking and private equity investing with almost 34 years of experience in energy markets. He has extensive experience in corporate strategy, marketing and business planning in oil, gas and electricity industries in the United Kingdom. He moved to Hong Kong in 1997 and enjoyed an 11-year career in regional investment banking. He was a partner in Actis, a specialist private equity investor in emerging markets, before joining the Hongkong and Shanghai Banking Corporation Limited as an investment banker. Mr. McGregor completed his honours degree in Applied Chemistry from Strathclyde University, United Kingdom and obtained his Masters Degree in Business Administration from the same university. He is not connected with any government agency or instrumentality. LUIS MIGUEL O. ABOITIZ First Vice President Mr. Luis Miguel O. Aboitiz, 50 years old, Filipino, has been First Vice President of AEV since 2004. He joined AEV in 1995 as Vice President. He is also AboitizPower’s Senior Vice President – Power Marketing and Trading since 2009. He is currently Director and First Vice President of ACO; Director and President and Chief Executive Officer of Aboitiz Energy Solutions, Inc. (AESI) and Adventenergy, Inc. (AdventEnergy); Director of STEAG Power, ARI, TPI, Pilmico, PANC, MORE, TMO, TSI, TLI, APRI, Pagbilao Energy Corporation (PEC) and CPDC. He graduated from Santa Clara University, California, U.S.A. with a Bachelor of Science degree in Computer Science and Engineering and took his Masters in Business Administration at the University of California in Berkeley, U.S.A. He is not connected with any government agency or instrumentality. SABIN M. ABOITIZ First Vice President Mr. Sabin M. Aboitiz, 50 years old, Filipino, has been First Vice President of AEV since May 2014. He is a Trustee of Aboitiz Foundation; Trustee and Treasurer of WeatherPhilippines; Director and President of AESI and Aseagas Corporation (Aseagas); and Director of AboitizLand, AdventEnergy, and MORE. He is the Chairman of the Board of Filagri, Inc. and Pilmico Bioenergy, Inc. (PBI). He is likewise Chairman and President of AEV Av; Director and President/Chief Executive Officer of PANC, Pilmico and Filagri Holdings, Inc. He took up Business Administration – Finance at Gonzaga University, Spokane, U.S.A. He is not connected with any government agency or instrumentality.


HORACIO C. ELICANO First Vice President – Chief Technology Officer

Mr. Horacio C. Elicano, 55 years old, Filipino, has been First Vice President and Chief Technology Officer of AEV since 2009. Before he joined AEV, he was Managing Director of Catapult Communications. He was also Chief Technology Officer of Paysetter International, Inc. from 2001 to 2007 and of Chikka Asia, Inc. from 2001 to 2005. Prior to that, he logged 20 years in the banking industry with Citibank and UnionBank. He is a Bachelor of Science in Electrical Engineering graduate of the University of the Philippines. He is not connected with any government agency or instrumentality. ROMÁN V. AZANZA III First Vice President – Business Development Mr. Román V. Azanza III, 46 years old, Filipino, has been First Vice President-Business Development of AEV since October 2011. Mr. Azanza currently leads AEV’s thrust into the Puplic Private Partnership and privately initiated infrastructure space. Before he joined AEV, he was the Regional Treasurer for Asia of CEMEX Asia Pte. Ltd. and served as Director for Strategic Planning at CEMEX Malaysia. He was previously with ING Barings where he was involved in both project finance and debt execution, and at Citibank, N.A. as a member of the North Asian Regional Audit team. He has extensive experience in banking, strategic planning and corporate treasury. He holds an A.B. in Economics degree from Colby College, and earned his MBA at the Darden School of Business, University of Virginia, U.S.A. He also completed the CEMEX International Management Program in 2003. He is not connected with any government agency or instrumentality. MELINDA R. BATHAN First Vice President - Controller

Ms. Melinda R. Bathan, 55 years old, Filipino, has been First Vice President-Controller of AEV since May 2012. She was previously AEV’s Vice President-Controller from 2004 until 2012. She is Director and Treasurer of CPDC. She graduated summa cum laude from St. Theresa’s College with a Bachelor of Science degree in Commerce, major in Accounting, and is a Certified Public Accountant. She completed her Masters in Management, with honors, at the University of the Philippines. She is not connected with any government agency or instrumentality.

NARCISA S. LIM First Vice President - Human Resources and Quality

Ms. Narcisa S. Lim, 51 years old, Filipino, has been First Vice President- Human Resources and Quality of AEV since May 2012. She was Vice President for Human Resources and Quality of AEV from 2008to 2012. She holds a degree in International Studies from Maryknoll College. She is not connected with any government agency or instrumentality.

CATHERINE R. ATAY Assistant Vice President – Corporate Secretarial and Compliance Services for Legal and

Corporate Services/ Assistant Corporate Secretary

Ms. Catherine R. Atay, 36 years old, Filipino, has been Assistant VicePresident – Corporate Secretarial and Compliance Services for Legal and Corporate Services of AEV since May 2012. She is concurrently the Assistant Corporate Secretary of AEV. She is also Corporate Secretary of ACO, ARI, Abovant, Cotabato Light, Davao Light, Pilmico, PANC, TPI, Tsuneishi Foundation (Cebu), Inc., THI, TSI, CPPC, LHC and West Cebu Foundation, Inc. She is also the Assistant Corporate Secretary of ACGI, BEZ, MEZ, Cotabato Ice Plant, Inc., EAUC, Hedcor, Hedcor Bukidnon, Hedcor Sabangan, Hedcor Tudaya, Hedcor Tamugan, TMI, TMO, TLI and


Hydro Electric Development Corporation. She earned her Bachelor of Science in Accountancy degree (cum laude) and Bachelor of Laws degree from the University of San Carlos. She is a member of the Integrated Bar of the Philippines and is a Certified Public Accountant. She completed the Professional Directors course of the Institute of Corporate Directors. She is not connected with any government agency or instrumentality Period in which the Directors and Executive Officers Should Serve The directors and executive officers should serve for a period of one year. Term of Office of a Director

Pursuant to the Company’s Amended By-Laws, the directors are elected at each annual stockholders’ meeting by stockholders entitled to vote. Each director holds office until the next annual election for a term of one year and until his successor is duly elected, unless he resigns, dies or is removed prior to such election. Any vacancy in the Board other than by removal or expiration of term may be filled by a majority vote of the remaining members thereof at a meeting called for that purpose, if they still constitute a quorum. The director so chosen shall serve for the unexpired term of his predecessor in office.

(2) Significant Employees

AEV considers the contribution of every employee important to the fulfillment of its goals.

(3) Family Relationships

Messrs. Jon Ramon, Roberto and Mikel Aboitiz are brothers and are thus related to each other within the fourth civil degree of consanguinity. Messrs. Erramon, Enrique, Sabin and Xavier Jose Aboitiz are brothers and are thus related to each other within the fourth civil degree of consanguinity. They are also related within the fourth civil degree of consanguinity to Mr. Stephen G. Paradies, who is their first cousin.

(4) Involvement in Certain Legal Proceedings as of March 31, 2015

To the knowledge and/or information of AEV, none of its nominees for election as directors, its current members of the Board or its executive officers is presently involved in any legal proceeding or bankruptcy petition or has been convicted by final judgment, or being subject to any order, judgment or decree, or has violated the securities or commodities law in any court or government agency in the Philippines or elsewhere for the past five years until March 31, 2015, which would put to question his/her ability and integrity to serve AEV and its stockholders.

(5) Parent Company

AEV’s parent company is ACO. As of March 31, 2015, ACO owns 49.35% of the voting shares of AEV.

(b) Resignation or Refusal to Stand for Re-election by Members of the Board of Directors

No director has resigned nor declined to stand for re-election to the Board since the date of AEV’s last Annual Stockholders’ Meeting because of disagreement with AEV on matters relating to its operations, policies and practices.


Item 10. Executive Compensation (1) Summary of Compensation Table

Information as to the aggregate compensation paid or accrued to AEV’s Chief Executive Officer and four most highly compensated executive officers, as well as other directors and officers during the last two completed fiscal years and the ensuing fiscal year are as follows:

CHIEF EXECUTIVE OFFICER AND THE FOUR MOST HIGHLY COMPENSATED OFFICERS* YEAR SALARY BONUS OTHER

COMPENSATION ERRAMON I. ABOITIZ

President & Chief Executive Officer STEPHEN G. PARADIES

Senior Vice President/Chief Financial Officer / Corporate Information Officer

XAVIER JOSE ABOITIZ Senior Vice President – Chief Human Resources Officer

LUIS MIGUEL O. ABOITIZ First Vice President

SUSAN V. VALDEZ Senior Vice President – Chief Reputation Officer and Risk Management Officer

All above named officers as a group

Actual 2014 P91,792,880.00 P9,315,480.00 P7,731,019.00

Actual 2013 P116,112,260.00 P8,644,000.00 P7,046,794.00

Projected 2015 P100,972,168.00 P10,247,028.00 P8,504,120.00

All other unnamed directors and officers as a group

Actual 2014** P56,124,610.00 P7,774,180.00 P28,623,295.00

Actual 2013 P73,958,787.00 P11,373,748.00 P30,735,766.00 Projected 2015 P61,737,071.00 P8,551,598.00 P31,485,624.00

* The four most highly compensated officers in 2013 are Messrs. Stephen G. Paradies, Xavier Jose Aboitiz, Luis Miguel O. Aboitiz and Ms. Susan V. Valdez.

** The 2014 Amended By-Laws of the Company as approved by the Securities and Exchange Commission on May 16, 2014 defined corporate officers as follows: the Chairman of Board, the Vice Chairman, the Chief Executive Officer, Chief Operating Officer(s), the Treasurer, the Corporate Secretary, the Assistant Corporate Secretary, and such other officers as may be appointed by the Board of Directors. For the year 2014, the Company's Summary of Executive Compensation covers the compensation of officers as reported under Item 9 of this Annual Report, which are lesser in number than the previous year.

Except for the regular company retirement plan, which by its very nature will be received by the officers concerned only upon retirement from the Company, the above-mentioned officers do not receive any other compensation in the form of warrants, options, and/or profit-sharing. There is no compensatory plan or arrangement between the Company and any executive in case of resignation or any other termination of employment or from a change-in-control of the Company.

(2) Compensation of Directors

(i) Standard Arrangements

In 2014, all of AEV’s directors received a monthly allowance of P100,000.00 except for the Chairman of the Board who received a monthly allowance of P150,000.00.


In addition, each director and the Chairmen of the Board and the Board Committees received a per diem for every Board or Committee meeting attended as follows:

Type of Meeting Committee Members Chairman of the Committee Committee Meeting P80,000.00 P100,000.00

For 2015, it is proposed that all AEV’s directors shall receive a monthly allowance of P120,000.00, except for the Chairman of the Board who shall receive a monthly allowance of P80,000.00.

The proposed incease of monthly allowance of the AEV’s directors will be submitted for the approval of the stockholders during the 2015 Annual Stockholders’ Meeting on May 18, 2015.

(ii) Other Arrangements

Other than payment of the directors’ allowance and the per diem as stated, there are no standard arrangements pursuant to which directors of the Company are compensated or are to be compensated, directly or indirectly, for any services provided as a director.

(3) Employment Contracts and Termination of Employment and Change-in-Control

Arrangements

There is no compensatory plan or arrangement between AEV and any executive officer that results or will result from the resignation or any other termination of employment or from a change in the management control of AEV.

(4) Warrants and Options Outstanding

To date, AEV has not granted any stock option to its directors or officers

Type of Meeting Directors Chairman of the Board Board Meeting P100,000.00 P150,000.00

Current Monthly Allowance

(as of 2014)

Proposed Monthly Allowance

Chairman of the Board P150,000.00 P180,000.00 Members of the Board P100,000.00 P120,000.00


Item 11. Security Ownership of Certain Beneficial Owners and Management

(1) Security Ownership of Certain Record and Beneficial Owners (more than 5%) as of March 27, 2015

Title of Class

Name/Address of Record Owner and Relationship with Issuer

Name of Beneficial

Owner Citizenship

No. of Shares and Nature of

Ownership (Record or Beneficial)

Percent of Class

Common

1. Aboitiz & Company, Inc.8 Aboitiz Corporate Center Gov. Manuel A. Cuenco Avenue, Kasambagan, Cebu City 6000 (Stockholder)

ACO9

Filipino

2,735,600,915 (Record and

Beneficial)

49.35%

Common

2. PCD Nominee Corporation 10 (Filipino) G/F MSE Bldg. Ayala Avenue, Makati City

(Stockholder)

PCD participants acting for themselves or for their customers11

Filipino

576,392,975

(Record)

10.40%

Common

3. PCD Nominee Corporation12 (Foreign) G/F MSE Bldg. Ayala Avenue,

Makati City (Stockholder)

PCD participants acting for themselves or for their customers13

Non-Filipino

566,272,831

(Record)

10.21%

Common

4. Ramon Aboitiz Foundation, Inc. 14

35 Lopez Jaena St., Cebu City (Stockholder)

RAFI

Filipino

424,538,863 (Record and

Beneficial)

7.66%

8 ACO, the major shareholder of AEV, is a corporation wholly-owned by the Aboitiz family. No single stockholder, natural or juridical,

owns 5% or more of the shareholdings of ACO. 9 Mr. Erramon I. Aboitiz, ACO President and Chief Executive Officer, will vote for the shares of ACO in AEV in accordance with the

directive of the Board of Directors of ACO. 10 PCD Nominee Corporation (Filipino and Foreign) is not related to AEV. The beneficial owners of the shares held through a PCD

participant are the beneficial owners thereof to the extent of the number of shares registered under the respective accounts with the PCD participant.

11 AEV has no record relating to the power to decide how the shares held by PCD Nominee Corporation (Foreign and Filipino) to be voted. Of the 576,392,975 shares held by PCD Nominee Corporation (Filipino), at least 343,525,686 share or 6.20% of the voting stock of AEV are for the account of Papa Securities Corporation (PapaSec). AEV is not r elated to PapaSec.

12 Supra Note 11. 13 Supra Note 12. 14 Mr. Roberto E. Aboitiz and/or Mr. Jon Ramon Aboitiz, Chairman/President and Vice President, respectively, of the RAFI, will vote for the

shares of RAFI in AEV in accordance with the directive of the RAFI Board of Trustees.


(2) Security Ownership of Management as of March 27, 2015 (Record and Beneficial)

Name of Beneficial Owner and Position

Title of Class

No. of Shares and Nature of Ownership

(Record or Beneficial)

Citizenship

Percentage of

Ownership

Jon Ramon Aboitiz Director/Chairman of the Board

Common

4,648 Direct Filipino

0.00%

129,200,932 Indirect 2.33%

Erramon I. Aboitiz Director/President & Chief Executive Officer

Common

1,001,000 Direct Filipino

0.02%

56,477,269 Indirect 1.02 %

Enrique M. Aboitiz Director Common


0.00%

0 Indirect 0.00%

Roberto E. Aboitiz Director Common

10 Direct Filipino

0.00%

0 Indirect 0.00%

Justo A. Ortiz Director Common

1 Direct Filipino

0.00%

0 Indirect 0.00%

Antonio R. Moraza Director Common


0.00%

15,351,132 Indirect 0.28%

Jose C. Vitug Independent Director Common

100 Direct Filipino

0.00%

72,020 Indirect 0.00%

Raphael Perpetuo M. Lotilla Independent Director Common

100 Direct Filipino

0.00%

0 Indirect 0.00%

Stephen T. CuUnjieng Independent Director Common

100 Direct Filipino

0.00%

0 Indirect 0.00% Stephen G. Paradies Senior Vice President/Chief Financial Officer/ Corporate Information Officer

Common

0 Direct

Filipino

0.00%

22,380,003 Indirect 0.40%

Mikel A. Aboitiz Senior Vice President Common

10 Direct Filipino

0.00%

93,399,799 Indirect 1.68 %

Juan Antonio E. Bernad Senior Vice President Common


0.01%

378,286 Indirect 0.01%

Xavier Jose Aboitiz Senior Vice President - Chief Human Resources Officer

Common 1,998,236 Direct

Filipino 0.04%

19,198,732 Indirect 0.35%

Gabriel T. Mañalac Senior Vice President - Group Treasurer

Common 66,598 Direct

Filipino 0.00%

0 Indirect 0.00% M. Jasmine S. Oporto Senior Vice President - Chief Legal Officer/ Corporate Secretary/ Compliance Officer


Filipino 0.00%

0 Indirect 0.00%


Name of Beneficial Owner and Position

Title of Class

No. of Shares and Nature of Ownership

(Record or Beneficial)

Citizenship

Percentage of

Ownership Susan V. Valdez Senior Vice President – Chief Reputation and Risk Management Officer

Common


0.01%

0 Indirect 0.00%

Robert McGregor Senior Vice President - Chief Strategy and Investment Officer


Filipino 0.00%

0 Indirect 0.00%

Luis Miguel O. Aboitiz First Vice President Common


0.42%

0 Indirect 0.00%

Sabin M. Aboitiz First Vice President Common


0.26%

2,764,114 Indirect 0.05%

Horacio C. Elicano First Vice President - Chief Technology Officer


Filipino 0.00%

0 Indirect 0.00%

Román V. Azanza III First Vice President – Business Development


Filipino 0.00%

0 Indirect 0.00%

Melinda R. Bathan First Vice President - Controller Common


0.00%

0 Indirect 0.00%

Narcisa S. Lim First Vice President - Human Resources and Quality

Common


0.00%

0 Indirect 0.00%

Catherine R. Atay Assistant Vice President – Corporate Secretarial and Compliance Services for Legal and Corporate Services/ Assistant Corporate Secretary

Common

0 Direct

Filipino

0.00%

0 Indirect 0.00%

TOTAL 381,931,197 6.89%

(3) Voting Trust Holders of 5% or More of Common Equity

No person holds under a voting trust or similar agreement more than 5% of AEV’s common equity.

(4) Changes in Control

There are no arrangements that may result in a change in control of AEV during the period covered by this report.

Item 12. Certain Relationships and Related Transactions

AEV and its subsidiaries (the Group), in their regular conduct of business, have entered into related party transactions consisting of professional and technical services, rental, money market placements, and power sales and purchases. These are made on an arm’s length basis.


ACO, the parent company of AEV, and certain associates have service contracts with either AEV or AboitizPower (parent companies) for corporate center services rendered, such as human resources, internal audit, legal, treasury and corporate finance, among others. These services are obtained from AEV and AboitizPower to enable the Group to realize cost synergies. The parent companies maintain a pool of highly qualified professionals with business expertise specific to the businesses of the Group. Transactions are priced on an arm’s length basis, and covered with Service Level Agreements to ensure quality of service. ACO and certain associates are leasing office spaces from Cebu Praedia Development Corporation, a Subsidiary of AEV. Rental rates are comparable with prevailing market prices. These transactions are covered with lease contracts for a period of three years. The Group has cash deposits and money market placements with Union Bank of the Philippines and City Savings Bank, Inc., AEV's banking associates. These are earning interest at prevailing market rates. Power generation subsidiaries sell to certain power associates based on their respective power supply agreements. Meanwhile, power distribution subsidiaries purchase from certain generation associates based on existing power purchase agreements. A wholly-owned construction and steel fabrication subsidiary of ACO renders its services to the Group for the construction of new power plants. The Company’s retirement benefit fund (the “Fund”) is in the form of a trust being maintained and managed by ACO. The Fund has investments in the equity of one of its subsidiaries. The above related party transactions are discussed extensively in the audited financial statements of the Company. No other transaction, without proper disclosure, was undertaken by the Company in which any director or executive officer, any nominee for election as director, any beneficial owner (direct or indirect) or any member of his immediate family was involved or had a direct or indirect material interest. AEV employees are required to promptly disclose any business and family-related transactions with the Company to ensure that potential conflicts of interest are determined and brought to the attention of management.

PART IV – CORPORATE GOVERNANCE

Item 13. Corporate Governance

The Company’s Annual Corporate Governance Report is attached as Annex “B” of this SEC Form 17-A (Annual Report) pursuant to SEC Memorandum Circular No. 5, series of 2013, issued last March 20, 2013. The Company’s full Corporate Governance Report is also available at the Company’s website at www.aboitiz.com.


PART V – EXHIBITS AND SCHEDULES Item 14. Exhibits and Reports on SEC Form 17-C (a) Exhibits.

None

(b) Reports on SEC Form 17-C Reports filed by the AEV on SEC Form 17-C from April 2014 – March 2015 are as follows:

Date Disclosure Details

April 15, 2014 Appointment of Officer April 30, 2014 Resignation of Officer April 30, 2014 Notice of Record Date for AEV’s Seven-year and Ten-year Fixed Rate Bonds

May 7, 2014 First Quarter 2014 Financial and Operating Results May 9, 2014 Retirement of Officer

May 12, 2014 Appointment of Officer May 16, 2014 SEC’s Approval of the Amended By-Laws May 19, 2014 Stockholders’ Approval of the Amended Articles of Incorporation May 19, 2014 Results of the 2015 Annual Stockholders’ Meeting May 19, 2014 Results of the 2015 Organizational Meeting May 29, 2014 Acquisition of Interests in VinhHoan 1 Feed JSC June 2, 2014 Submission of Bid Documents to DPWH for the Bidding of the Cavite-Laguna

Expressway Project June 9, 2014 AseaGas Entered into A Notes Facility and Security Agreement with Development Bank

of the Philippines June 13, 2014 SEC’s Approval of the Amended Articles of Incorporation June 13, 2014 Submission the Highest Winning Bid for the Cavite-Laguna Expressway Project June 20, 2014 Receipt of the Notice of Award from Davao City Water District for the Davao Bulk

Water Project July 11, 2014 Team Orion’s Filing of a Motion to Intervene for the Cavite-Laguna Expressway Bidding July 21, 2014 Press Release on Team Orion’s Request to Dismiss Cavite-Laguna Expressway Project

Appeal July 23, 2014 Team Orion’s Comment on Optimal Infrastructure Development’s Memorandum on

Appeal in the Cavite-Laguna Expressway Bidding July 24, 2014 Matters Approved by the Board of Directors July 31, 2014 Closing of Transaction for the Acquisition of Interests in VinhHoan 1 Feed JSC July 31, 2014 Second Quarter 2014 Financial and Operating Results

August 1, 2014 Updates to AEV’s Website in Compliance with SEC MC 11-2014 August 28, 2014 Approval of the Sale of a Portion of AEV’s Treasury Shares by the Board of Directors August 29, 2014 Sale of Treasury Shares

September 2, 2014 Sale of Treasury Shares October 27, 2014 Team Orion’s Filing of Motion for Decision in the Case Pending Before the Office of the

President for the Cavite-Laguna Expressway Bidding October 27, 2014 Press Release re Team Orion Urges Palace to Settle Cavite-Laguna Expressway Bidding

Stalemate October 29, 2014 Third Quarter 2014 Financial and Operating Results

November 27, 2014 Change of Designation of Officer November 27, 2014 Extension of Term of the President and Chief Executive Officer

January 20, 2015 Sale of Treasury Shares January 27, 2015 Submission of Pre-qualification Documents to Department of Transportation and

Communication for the LRT 2 System and the Masinag Extension System Project February 26, 2015 Submission of Final List of Nominees Qualified to be Members of the Board of


Date Disclosure Details

Directors February 27, 2015 Submission of Pre-qualification Documents to Department of Public Work and

Highways for the Laguna Lake Expressway-Dike Project March 10, 2015 Declaration of Cash Dividends March 10, 2015 Matters Approved by the Board March 10, 2015 Notice of 2015 Annual Stockholders Meeting March 11, 2015 Full Year 2014 Financial and Operating Results March 17, 2015 Signing of Contractual Joint Venture Agreement and Bulk Water Purchase Agreement

with Davao City Water District March 26, 2015 Board’s Approval of the Issuance of Fixed-Rate Retail Bonds

Annex "B"

1

SECURITIES AND EXCHANGE COMMISSION

SEC FORM – ACGR

ANNUAL CORPORATE GOVERNANCE REPORT

1. Report is Filed for the Year 22014 2. Exact Name of Registrant as Specified in its Charter ABOITIZ EQUITY VENTURES, INC. 3. 32nd Street, Bonifacio Global City, Taguig City, Metro Manila 1634 Address of principal office Postal Code 4. SEC Identification Number CE02536 5. (SEC Use Only)

Industry Classification Code 6. BIR Tax Identification Number 003-828-269-V

7. (02) 886-2800 Issuer’s Telephone number, including area code

8. N.A. _________________________________ Former name or former address, if changed from the last report

2

TABLE OF CONTENTS

A. BOARD MATTERS………………………………………………………………………………………………………………………….……….4 1) BOARD OF DIRECTORS

(a) Composition of the Board………………………………………………………………………………….………4 (b) Directorship in Other Companies…………………………………………………………………………….11 (c) Shareholding in the Company……………………………………….……………………………………......15

2) CHAIRMAN AND CEO………………………………………………………………………………………………………………16 3) OTHER EXECUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS…………………………………….18 4) CHANGES IN THE BOARD OF DIRECTORS…………………………………………………………………………………22 5) ORIENTATION AND EDUCATION PROGRAM…………………………………………………………………….…….30

B. CODE OF BUSINESS CONDUCT & ETHICS……………………………………………………………………………………….…….31

1) POLICIES………………………………………………………………………………………………………………………………….31 2) DISSEMINATION OF CODE………………………………………………………………………………………………………31 3) COMPLIANCE WITH CODE……………………………………………………………………………………………………….31 4) RELATED PARTY TRANSACTIONS……………………………………………………………………………………………..40

(a) Policies and Procedures…………………………………………………………………………………………..40 (b) Conflict of Interest…………………………………………………………………………………………………..44

5) FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS…………………………………………………….……45 6) ALTERNATIVE DISPUTE RESOLUTION………………………………………………………………………………………45

C. BOARD MEETINGS & ATTENDANCE……………………………………………………………………………………………….…….10

1) SCHEDULE OF MEETINGS…………………………………………………………………………………………………………46 2) DETAILS OF ATTENDANCE OF DIRECTORS………………………………………………………………………………..46 3) SEPARATE MEETING OF NON-EXECUTIVE DIRECTORS………………………………………………………………46 4) ACCESS TO INFORMATION……………………………………………………………………………………………………….47 5) EXTERNAL ADVICE……………………………………………………………………………………………………………………49 6) CHANGES IN EXISTING POLICIES……………………………………………………………………………………………….50

D. REMUNERATION MATTERS………………………………………………………………………………………………………………50

1) REMUNERATION PROCESS……………………………………………………………………………………………………….50 2) REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS…………………………………………………….52 3) AGGREGATE REMUNERATION …………………………………………………………………………………………………54 4) STOCK RIGHTS, OPTIONS AND WARRANTS………………………………………………………………………………55 5) REMUNERATION OF MANAGEMENT…………………………………………………………………………………….….56

E. BOARD COMMITTEES……………………………………………………………………………………………………………………….56

1) NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES…………………………………………………..56 2) COMMITTEE MEMBERS……………………………………………………………………………………………………………67 3) CHANGES IN COMMITTEE MEMBERS……………………………………………………………………………………….71 4) WORK DONE AND ISSUES ADDRESSED…………………………………………………………………………………….71 5) COMMITTEE PROGRAM……………………………………………………………………………………………………………73

F. RISK MANAGEMENT SYSTEM……………………………………………………………………………………………………………73

1) STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM…………………………………………..73 2) RISK POLICY……………………………………………………………………………………………………………………………..74 3) CONTROL SYSTEM……………………………………………………………………………………………………………………77

G. INTERNAL AUDIT AND CONTROL………………………………………………………………………………………………………82

1) STATEMENT ON EFFECTIVENESS OF INTERNAL CONTROL SYSTEM…………………………………………..82 2) INTERNAL AUDIT

3

(a) Role, Scope and Internal Audit Function…………………………………………………………………..83 (b) Appointment/Removal of Internal Auditor………………………………………………………………84 (c) Reporting Relationship with the Audit Committee…………………………………………………..84 (d) Resignation, Re-assignment and Reasons…………………………………………………………………84 (e) Progress against Plans, Issues, Findings and

Examination Trends………………………………………………………..….……………………………………85 (f) Audit Control Policies and Procedures……………………………………………………………………..85 (g) Mechanisms and Safeguards…………………………………………………………………………………...86

H. RIGHTS OF STOCKHOLDERS……………………………………………………………………………………………………………...95

1) RIGHT TO PARTICIPATE EFFECTIVELY IN STOCKHOLDERS’ MEETINGS……………………………………….95 2) TREATMENT OF MINORITY STOCKHOLDERS……………………………………………………………….……….105

I. INVESTORS RELATIONS PROGRAM………………………………………………………………………………………………..106 J. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES………………………………………………………………………….108 K. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL………………………………………………………………….108 L. INTERNAL BREACHES AND SANCTIONS…………………………………………………………………………………………110

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A. BOARD MATTERS 1) Board of Directors

Number of Directors per Articles of Incorporation nine (9) Actual number of Directors for the year nine (9)

(a) Composition of the Board

Complete the table with information on the Board of Directors: (2014-2015)

Director’s Name

Type [Executive (ED), Non-

Executive (NED) or Independent

Director (ID)]

If

nominee, identify

the principal

Nominator in

the last election (if ID, state the

relationship with the nominator)

Date first

elected

Date last elected (if ID, state the

number of years served as ID)1

Elected when

(Annual /Special Meeting)

No. of years

served as

director

Jon Ramon Aboitiz

NED NA Erramon I. Aboitiz

1994 May 19, 2014 ASM 20

Erramon I. Aboitiz

ED NA Erramon I. Aboitiz

1994 May 19, 2014 ASM 20

Roberto E. Aboitiz

NED NA Dominica Chua

1994 May 19, 2014 ASM 20

Enrique M. Aboitiz, Jr.


1994 May 19, 2014 ASM 20

Justo A. Ortiz NED NA Regina R. Andoy

1994 May 19, 2014 ASM 20

Antonio R. Moraza


May 2009

May 19, 2014 ASM 5

Jose C. Vitug ID NA Patricia N. Arches

2005 May 19, 2014 ASM 9

Stephen T. CuUnjieng

ID NA Josephine R. Pabriga

2010 May 19, 2014 ASM 4

Raphael P.M. Lotilla

ID NA Joann V. Lucero

May 2012

May 19, 2014 ASM 2

Sources: 2014 Definitive Information Statement (SEC Form 20-IS) 2014 AEV Nomination Forms

(b) Provide a brief summary of the corporate governance policy that the board of directors has adopted. Please emphasize the policy/ies relative to the treatment of all shareholders, respect for the rights of minority shareholders and of other stakeholders, disclosure duties, and board responsibilities.

The Company's Manual of Corporate Governance institutionalizes the principles of good corporate governance in the entire organization. The Board of Directors, Management, Employees, and Shareholders of Aboitiz Equity Ventures Inc. (“Company, “AEV”) believe that corporate governance is a necessary component of what constitutes sound strategic business management and will therefore undertake every effort necessary to create awareness within the organization as soon as possible.

(i) The Company’s Manual of Corporate Governance, approved by the Securities and Exchange

Commission on March 30, 2011 and amended as of January 10, 2014, provides for shareholder rights as follows:

1 Reckoned from the election immediately following January 2, 2012.

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The Board shall be committed to respect the following rights of the stockholders, which include rights of minority shareholders:

1. Voting Right – The Company follows the principle of one share- one vote for each

stockholder.

a. Shareholders shall have the right to elect, remove and replace directors and vote on certain corporate acts in accordance with the Corporation Code.

b. Cumulative voting shall be used in the election of directors. c. A director shall not be removed without cause if it will deny minority

shareholders representation in the Board. 2. Pre-emptive Right

All shareholders shall have pre-emptive rights, unless the same is denied in the articles of incorporation or an amendment thereto, and in documents signed by such shareholders. They shall have the right to subscribe to the capital stock of AEV. The Articles of Incorporation shall lay down the specific rights and powers of shareholders with respect to the particular shares they hold, all of which shall be protected by law so long as they shall not be in conflict with the Corporation Code.

3. Power of Inspection

All shareholders shall be allowed to inspect corporate books and records including minutes of Board meetings and stock registries in accordance with the Corporation Code and shall be furnished with annual reports, including financial statements, without cost or restrictions.

4. Right to Information

a. The shareholders shall be provided, upon request, with periodic

reports which disclose personal and professional information about the Directors and officers and certain other matters such as their holdings of AEV’s shares, dealings with AEV, relationships among directors and key officers, and the aggregate compensation of directors and officers.

b. The minority shareholders shall be granted the right to propose the holding of a meeting, and the right to propose items in the agenda of the meeting, provided the items are for legitimate business purposes.

c. The minority shareholders shall have access to any and all information relating to matters for which the management is accountable for and to those relating to matters for which the management shall include such information and, if not included, then the minority shareholders shall be allowed to propose to include such matters in the agenda of shareholders’ meeting, being within the definition of “legitimate purposes”.

5. Right to Dividends

a. Shareholders shall have the right to receive dividends subject to the

discretion of the Board. b. AEV intends to maintain an annual cash dividend payment ratio of

approximately one-third of its consolidated net income from the preceding fiscal year, subject to the requirements of applicable laws and regulations and the absence of circumstances which may restrict the payment of cash dividends, such as the undertaking by AEV of major projects and developments requiring substantial cash

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expenditures or restrictions on cash dividend payments under its loan covenants

6. Appraisal Right

The shareholders shall have appraisal right or the right to dissent and demand payment of the fair value of their shares in the manner provided for under Section 82 of the Corporation Code of the Philippines, under any of the following circumstances: a. In case any amendment to the articles of incorporation has the effect

of changing or restricting the rights of any shareholders or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence;

b. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Corporation Code; and

c. In case of merger or consolidation. The Board should be transparent and fair in the conduct of the annual and special shareholders' meetings of AEV. The shareholders should be encouraged to personally attend such meetings. If they cannot attend, they should be apprised ahead of time of their right to appoint a proxy. Subject to the requirements of the By-laws, the exercise of that right shall not be unduly restricted and any doubt about the validity of a proxy should be resolved in the shareholder's favor. It shall be the duty of the directors to promote shareholder rights, remove impediments to the exercise of shareholders’ rights and allow possibilities to seek redress for violation of their rights. They shall encourage the exercise of shareholders’ voting rights and the solution of collective action problems through appropriate mechanisms. They shall be instrumental in removing excessive costs and other administrative or practical impediments to shareholders’ meaningful participation in meetings and/or voting in person. The directors shall pave the way for the electronic filing and distribution of shareholder information necessary to make informed decisions subject to legal constraints. Accurate and timely information should be made available to the shareholders to enable them to make a sound judgment on all matters brought to their attention for consideration or approval. Although all shareholders should be treated equally or without discrimination, the Board should give minority shareholders, in accordance with the By-laws, the right to propose the holding of meetings and the items for discussion in the agenda that relate directly to the business of AEV. Source: Section VIII of Amended Manual of Corporate Governance

(ii) The following are the Company’s governance policies regarding Disclosures:

Section VII of the Company’s Manual of Corporate Governance provides:

“REPORTORIAL OR DISCLOSURE SYSTEM OF AEV’S CORPORATE GOVERNANCE POLICIES” A. The reports of disclosures required under this Manual shall be prepared and submitted to the SEC by the responsible Committee or officer through AEV's Compliance Officer. B. All material information shall be publicly disclosed. Such information shall include earnings results, acquisition or disposal of assets, board changes, related party transactions, shareholdings of directors and changes to ownership. C. Other information that shall always be disclosed as required by law includes

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remuneration (including stock options) of all directors and senior management corporate strategy. D. All disclosed information shall be released via the approved stock exchange procedure for AEV announcements and other required reports. E. The Board shall commit at all times to fully disclose material information dealings. It shall cause the filing of all required information for the interest of the stakeholders.”

In addition, the Company’s Information Disclosure Policy has the following objectives:

“I. This Disclosure Policy shall be implemented in accordance with applicable laws, and in the best interests of the Company and its shareholders. The goal of disclosure is to provide information to stakeholders and interested parties in order to assist such persons in making sound investment decisions. II. When disclosing information, the Company shall be guided by the principles of accuracy, accessibility, timeliness, completeness, and regularity, and additionally, will seek to maintain a reasonable balance between the transparency of the Company and the protection of its commercial interests, while complying with relevant provisions of the laws of the Philippines, the Articles of Incorporation, this Policy and other internal documents of the Company. III. The Company shall not avoid the disclosure of negative information if such information might be considered material or essential to stakeholders or potential investors. IV. For purposes of disclosure, the preferential treatment of any one group of recipients of such information (“Selective Disclosure”) shall be prohibited unless otherwise provided for by the laws of the Philippines, and other applicable and current rules and regulations.”

Finally, the Company’s Code of Ethics and Business Conduct mandates: “PROVIDE FAIR AND TRUTHFUL DISCLOSURES TO THE PUBLIC The Company has a responsibility under the law to communicate effectively so that the public is provided with full and accurate information in all material respects. To the extent that you are involved in the preparation of materials for dissemination to the public, you should be careful to ensure that the information in these materials is truthful, accurate and complete. In particular, the Company’s senior financial officers, executive officers and directors shall endeavor to promote full, fair, accurate, timely and understandable disclosure in the Company’s public communications, including documents that the Company files with or submits to the Securities and Exchange Commission and other regulators. If you become aware of a materially inaccurate or misleading statement in a public communication, you should report it immediately to the Office of the Corporate Secretary, Corporate Information Officer, Compliance Officer or the Audit Committee of the Board of Directors. MAINTAIN ACCURATE BOOKS AND RECORDS The Company must maintain accurate and complete books and records. Every business transaction undertaken by the Company must be recorded correctly and in a timely manner in the Company’s books and records. The Company therefore expects you to be candid and accurate when providing information for these documents. You are specifically prohibited from making false or misleading entries in the Company’s books and records. In particular, senior financial officers must endeavor to ensure that financial information included in the Company’s books and records is correct and complete in all material respects.”

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Source: Section VII of Amended Manual of Corporate Governance

(iii) The following are the Company’s governance policies regarding Board Responsibility:

The Company’s Manual of Corporate Governance provides for the following duties and responsibilities of members of the Board of Directors:

1. Duties and Responsibilities of a Director

A director shall comply with the following duties and responsibilities:

a. Conduct fair business transactions with AEV and ensure that personal interest does not bias Board decisions.

The basic principle to be observed is that a director should not use his position to profit or gain some benefit or advantage for himself and/or his related interests. He should avoid situations that may compromise his impartiality. If an actual or potential conflict of interest may arise on the part of a director, he should fully and immediately disclose it and should not participate in the decision-making process. A director who has a continuing material conflict of interest should seriously consider resigning from his position.

A conflict of interest shall be considered material if the director’s personal or business interest is antagonistic to that of AEV, or stands to acquire or gain financial advantage at the expense of AEV.

b. Devote time and attention necessary to properly discharge his duties and

responsibilities.

A director should devote sufficient time to familiarize himself with AEV’s business. He should be constantly aware of and knowledgeable with AEV’s operations to enable him to meaningfully contribute to the Board’s work. He should attend and actively participate in Board and committee meetings, review meeting materials and, if called for, ask questions or seek explanation.

c. Act judiciously.

Before deciding on any matter brought before the Board, a director should carefully evaluate the issues and, if necessary, make inquiries and request clarification.

d. Exercise independent judgment.

A director should view each problem or situation objectively. If a disagreement with other directors arises, he should carefully evaluate and explain his position. He should not be afraid to take an unpopular position. Corollarily, he should support plans and ideas that he thinks are beneficial to AEV.

e. Have a working knowledge of the statutory and regulatory requirements

affecting AEV, including the contents of its Articles of Incorporation and By-Laws, the requirements of the SEC, and where applicable, the requirements of other regulatory agencies.

A director should also keep abreast with industry developments and business trends in order to promote AEV’s competitiveness. The Corporate Information Officer shall ensure that directors and officers shall be updated on their corporate duties and responsibilities and on current relevant laws, rules and jurisprudence, and best business practices.

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f. Observe confidentiality.

A director should keep secure and confidential all non-public information he may acquire or learn by reason of his positions as director. He should not reveal confidential information to unauthorized persons without the authority of the Board.

To honor their responsibilities as Board members, representing all owners/shareholders and other key stakeholders, the Board Director must:

a. Take time to understand the Aboitiz Group, its goals and strategies, its

businesses, its governance, its brand and its key policies. b. Represent the Aboitiz Group positively and constructively in all external

dealings, seeking to enhance the Aboitiz name and reputation. c. Perform the role of Board member effectively, by:

i. Regularly attending meetings ii. Effectively contributing during discussion

iii. Willingly offering alternative viewpoints, to reflect own personal viewpoints

iv. Offering any viewpoints objectively, avoiding any comments of a personal nature about another member of the Board or his/her viewpoints

v. Listening to the viewpoints of other Board members with full respect and with care, to achieve optimal understanding

vi. Fully supporting decisions made by the Board in the external arena, even if that decision did not completely reflect own viewpoints.

d. If an Executive Director, maintain a primary identity as a Board member, while

dealing with Board matters, at the same time bringing to the Board the benefit of closer knowledge of operational considerations.

e. If an Independent Director, bring fully to the Board the benefit of the particular experience or expertise that encouraged the invitation to become a Board member, at the same time not feeling constrained to contribute on matters that may be outside personal experience and expertise.

f. Be constantly vigilant related to maintaining complete external confidentiality on details of Board discussions, individual viewpoints and any matters of sensitivity, other than the Board agrees is to be communicated in a specific manner.

g. Seek to find ways to continuously improve the efficiency and effectiveness of the Board, taking any suggestions related to this to the Board Chairman for his consideration.

h. Be prepared to receive and act upon any feedback received through the Board Chairman on ways that the member might improve performance as a Board Director.

A Board member may also be invited to become a member of one or more Board Committees. That committee(s) will have been formed by the Board to satisfy Board needs in relation to focused consideration of matters in a specific arena, as described in the Committee mandate, for the purpose of better ensuring that the Board is in a position to make properly informed decisions in that arena. To honor their responsibilities as a Board Committee member, the Board Director must:

a. Become familiar with the Committee mandate b. Become familiar with specific content areas covered by the Committee, and

not seek to divert into areas of content not specifically envisioned by the Committee mandate

c. Regularly attend Committee meetings d. Effectively contribute during discussion

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e. Willingly offer alternative viewpoints, to reflect own personal experiences and opinions

f. Constructively engage with the Group CEO and any other senior leader of the Group, who may be consulted for the purpose of the Committee being better informed, or better positioned to offer the Board a more reliable recommendation

g. Maintaining external confidentiality related to details of Committee discussion, including the individual views of members, other than as agreed for formal communication to the Board and/or Senior Management by the Committee as a whole

h. Seek to find ways to continuously improve the efficiency and effectiveness of the Committee, taking any suggestions related to this to the Committee Chairman for his consideration.

i. Be prepared to receive and act upon any feedback received through the Committee Chairman on ways that the member might improve performance as a Committee member.

Should the Board member accept an invitation to act in the capacity of the Chairman of the Board Committee, these responsibilities are expanded to include overseeing the conduct of the Board Committee in line with the Committee Mandate, including:

a. Managing the agenda of Committee meetings. b. Chairing Committee meetings, ensuring proper consideration of matters for

discussion and recommendation to the full Board. c. Ensuring each member of the Committee has full opportunity to express views

and contribute effectively to discussion. d. Drawing attention to a Committee member in any situation where for one

reason or another, the member is not contributing to discussion and recommendations as effectively as he/she could.

e. Drawing to the attention of the Board Chairman any situation where for one reason or another, a Committee member is failing consistently to honor responsibilities as a Committee member, as outlined above.

f. Ensuring appropriate record of Committee deliberations and conclusions are maintained.

g. Leading and facilitating the Committee in reporting back to the Chairman of the Board, or the Board overall, on considerations and recommendations on any matter, including both majority conclusions and recommendations and minority conclusions and recommendations.

Moreover, the Company’s Board Protocol provides for the following general responsibilities of members of the Board Directors:

A Director should be aware of his role and appreciate the crucial differences between management and direction. He should have an understanding of the legal framework within which they operate. A Director should have a good understanding of a board’s operation and how to ensure its effectiveness. In this regard, the following are the basic qualities and competencies that a Board Director should possess or endeavor to acquire:

a. Strategic business direction; b. Basic principles and practice of finance and accounting; c. Human resource direction; d. Improving business performance; and e. Organizing for the future.

With the above, the Director is therefore expected to:

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a. Owe his duty of care and loyalty to the Company. b. Respect and uphold all decisions made by the Board as a collegial

body. c. Devote time and attention necessary to properly discharge his duties

and responsibilities. d. A Director shall observe prudence in the handling of sensitive

company information. e. A Director shall undergo a seminar on corporate governance principles, on

relevant laws and charters applicable to the Company and the Board, and on the various businesses of the Company upon appointment to the Board.

The Board of Directors of the Company also approved in its regular meeting held on July 24, 2014 the amendments to the Company’s Manual of Corporate Governance as mandated by SEC Memorandum Circular No. 9-2014. These amendments reflect the thrust of the Company to protect and uphold the rights and interests not only of the shareholders but also of its other stakeholders. (Updated as of December 31, 2014)

(c) How often does the Board review and approve the vision and mission?

The Board participates in an Annual Board Retreat and Strategy Refresh to discuss both the strategic roadmap and policies of the Company, and a review of the Company’s vision and mission. The Board held its annual retreat on December 16, 2013 at the Company’s principal address in Taguig City.

(d) Directorship in Other Companies

(i) Directorship in the Company’s Group2

Identify, as and if applicable, the members of the Company’s Board of Directors who hold the office of director in other companies within its Group:

Director’s Name Corporate Name of the Group Company

Type of Directorship (Executive, Non-Executive, Independent). Indicate if

director is also the Chairman. Jon Ramon Aboitiz Aboitiz & Company, Inc. (ACO),

Aboitiz Power Corporation, Cotabato Light & Power Company, Davao Light & Power Company, Inc., Union Bank of the Philippines

Non-Executive

Erramon I. Aboitiz Aboitiz & Company, Inc., Aboitiz Power Corporation

Executive

2 The Group is composed of the parent, subsidiaries, associates and joint ventures of the company.

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Davao Light & Power Company, Inc., San Fernando Electric Light and Power Co. Inc., Cotabato Light & Power Company, Subic Enerzone Corporation, SN Aboitiz Power - Magat, Inc., SN Aboitiz Power - Benguet, Inc., Manila - Oslo Renewable Enterprise, Inc., Aboitiz Renewables, Inc., Therma Power, Inc., Balamban Enerzone Corporation, Mactan Enerzone Corporation and Abovant Holdings, Inc., Aboitiz Foundation, Inc., Aboitiz Land, Inc.

Non-Executive, Chairman

Union Bank of the Philippines, Pilmico Foods Corporation, Pilmico Animal Nutrition Corporation, Aboitiz Power (AP) Renewables, Inc., Cebu Energy Development Corporation, Redondo Peninsula Energy, Inc. Therma Luzon, Inc., Therma Mobile, Inc., Therma South, Inc.

Non-Executive

Roberto E. Aboitiz Cebu Industrial Park Developers, Inc., Cebu Industrial Park Services, Inc. and Propriedad Del Norte, Inc.


Davao Light & Power Company, Inc., Cotabato Light & Power Company, Tsuneishi Heavy Industries (Cebu), Inc.

Non-Executive

Vice Chairman of Aboitiz & Company, Inc. Executive

Enrique M. Aboitiz, Jr. Aboitiz Power Corporation, WeatherPhilippines Foundation, Inc.


Aboitiz & Company, Inc. Executive

Justo A. Ortiz Union Bank of the Philippines Executive, Chairman

Antonio R. Moraza Aboitiz Power Corporation, Aboitiz & Company, Inc., Abovant Holdings, Inc., Aboitiz Renewables, Inc., Therma Power, Inc., and Manila - Oslo Renewable Enterprise, Inc., East Asia Utilities Corporation,

Executive

13

Pilmico Foods Corporation, Pilmico Animal Nutrition Corporation, Therma Visayas, Inc., Luzon Hydro Corporation and Cebu Private Power Corporation, Therma Luzon, Inc., Therma Mobile, Inc., Therma South, Inc., AP Renewables, Inc.,, Hedcor, Inc., Hedcor Tudaya, Inc. Hedcor Sibulan, Inc.

Non-executive, Chairman

Cebu Energy Development Corporation SN Aboitiz Power - Benguet, Inc., SN Aboitiz Power - Magat, Inc., Southern Philippines Power Corporation, STEAG State Power Inc., Therma Marine, Inc. and Western Mindanao Power Corporation

Non-Executive

Jose C. Vitug None Stephen T. CuUnjieng None Raphael P.M. Lotilla None

(ii) Directorship in Other Listed Companies

Identify, as and if applicable, the members of the company’s Board of Directors who are also directors of publicly-listed companies outside of its Group:

Director’s Name Name of Listed Company

Type of Directorship (Executive, Non-Executive, Independent). Indicate if

director is also the Chairman. Jose C. Vitug ABS-CBN Holding Corp. Independent Jon Ramon Aboitiz Bloomberry Resorts Corporation Independent Jon Ramon Aboitiz International Container Terminal

Services, Inc. Non-executive

(iii) Relationship within the Company and its Group

Provide details, as and if applicable, of any relation among the members of the Board of Directors, which links them to significant shareholders in the company and/or in its group:

Director’s Name Name of the Significant Shareholder Description of the relationship

Jon Ramon Aboitiz Ramon Aboitiz Foundation, Inc. Vice President Jon Ramon Aboitiz Aboitiz & Company, Inc. Chairman Erramon I. Aboitiz Aboitiz & Company, Inc. President/ CEO/ Director Roberto E. Aboitiz Aboitiz & Company, Inc. Vice Chairman Roberto E. Aboitiz Ramon Aboitiz Foundation, Inc. President Antonio R. Moraza Aboitiz & Company, Inc. Senior Vice President Enrique M. Aboitiz. Jr. Aboitiz & Company, Inc. Director

(iv) Has the company set a limit on the number of board seats in other companies (publicly listed, ordinary

and companies with secondary license) that an individual director or CEO may hold simultaneously? In particular, is the limit of five board seats in other publicly listed companies imposed and observed? If yes, briefly describe other guidelines:

14

Guidelines Maximum Number of Directorships in other

companies Executive Director As provided in the Company’s

Manual of Corporate Governance, the following guidelines shall be used in the determination of the number of directorships for Board members: a) The nature of the business of AEV; b) Age of the director; c) Number of directorship/active memberships and officerships in other corporations or organizations; and d) Possible conflict of interest. The optimum number of directorships a Director shall hold shall be related to the capacity of a Director to perform his duties diligently in general. The CEO and other executive directors shall submit themselves to a low inactive limit on membership in other corporate boards. The same low limit shall apply to independent, non-executive directors who serve as full-time executives in other corporations. In any case, the capacity of directors to serve with diligence shall not be compromised.

As a holding company, the Company’s executive directors are appointed to Board seats of the Company’s Business Units or operational companies within the group. The Company follows the SEC rule on term and directorship limits of directors.

Non-Executive Director As provided in the Company’s Manual of Corporate Governance, the following guidelines shall be used in the determination of the number of directorships for Board members: a) The nature of the business of AEV; b) Age of the director; c) Number of directorship/active memberships and officerships in other

Same as above

15

corporations or organizations; and d) Possible conflict of interest. The optimum number of directorships a Director shall hold shall be related to the capacity of a Director to perform his duties diligently in general.

CEO The CEO and other executive directors shall submit themselves to a low inactive limit on membership in other corporate boards. The same low limit shall apply to independent, non-executive directors who serve as full-time executives in other corporations. In any case, the capacity of directors to serve with diligence shall not be compromised.

Same as above

The Company’s Independent Directors sit in no more than five boards of publicly-listed companies (PLCs), as shown in the certification of affiliations required from each of the nominated Independent Directors. Likewise, executive directors do not generally sit on other boards of PLCs outside the Group, unless they have substantial interest in the said company or they have been asked to sit in the capacity as independent directors. Currently, the Company’s executive directors do not sit in more than two boards of listed companies outside the Aboitiz Group.

(c) Shareholding in the Company

Complete the following table on the members of the company’s Board of Directors who directly and indirectly own shares in the company:

Name of Director Number of Direct shares Number of

Indirect shares / Through (name of record owner)

% of Capital Stock

Jon Ramon Aboitiz 4,648 128,548,372 0.00%; 2.33%

Erramon I. Aboitiz 1,001,000 56,477,269 0.02%; 1.04%

Roberto E. Aboitiz 10 0 0.00% Enrique M. Aboitiz, Jr. 6,000 0 0.00%; Justo A. Ortiz 1 0 0.00% Antonio R. Moraza 1,000 15,351,132 0.00%;

0.28% Jose C. Vitug 100 72,020 0.00%;

0.00% Stephen T. CuUnjieng 100 0 0.00% Raphael P.M. Lotilla 100 0 0.00%

(Updated as of September 30, 2014)

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2) Chairman and CEO

(a) Do different persons assume the role of Chairman of the Board of Directors and CEO? If no, describe the

checks and balances laid down to ensure that the Board gets the benefit of independent views.

Yes No Identify the Chair and CEO:

Chairman of the Board Jon Ramon Aboitiz CEO/President Erramon I. Aboitiz

(b) Roles, Accountabilities and Deliverables

Define and clarify the roles, accountabilities and deliverables of the Chairman and CEO.

Chairman Chief Executive Officer

Role

The Chairman, who may be a non-Executive Director, shall preside in all meetings of the Board of Directors and stockholders. He shall approve the agenda for all meetings of the Board of Directors and stockholders and also inform the Board of Directors and the stockholders of matters of interest to them at their respective meetings.

The President shall have “general supervision of the business affairs and property of the Corporation and over its several offices and employees. He shall execute all resolutions of the Board and sign all certificates, contracts and other written undertakings of the Corporation. He shall submit to the Board, as soon as possible, at each annual meeting, a complete report of the operations of the Corporation for the preceding year and the state of its affairs. He shall also from time to time, report to the Board matters within his knowledge which the interests of the Corporation may require to be brought to its notice. He shall do and perform such other duties as from time to time may be assigned to him by the Board of Directors.”

Accountabilities

BOARD LEADERSHIP AND THE ROLE OF THE CHAIRMAN a. The Chairman shall exercise independent judgment, act objectively, and ensure (alongside the President and Chief Executive Officer) that all relevant matters are included in the agenda and prioritized properly, giving more weight to “performance duties” (i.e. strategy and policy) over “compliance duties” (i.e. monitoring and accountability). b. The Chairman shall ensure that all the Directors are fully involved and informed of any business issue on which a decision has to be taken. c. The Chairman, with the assistance of

THE PRESIDENT AND CEO All Board authority delegated to management is delegated through the President, so that all authority and accountability of management – as far as the board is concerned – is considered to be the authority and accountability of the President. a. The Board will specify to the President of the Company the strategic directions and expects him to achieve certain results based on a set of measures/milestones and targets that had been clearly communicated and understood. b. As long as the President uses any

17

the Corporate Secretary and the President and Chief Executive Officer, shall determine the annual Board Plan and Agenda and other strategic issues. d. The Chairman shall be responsible for the integrity of the Board process, such that decisions made shall be explicit, timely, relevant to the Company’s vision and strategy, and anchored on policies, values and ethical standards. e. In the event that the Chairman may not be available or capable of performing the above functions, the Vice Chairman or in his absence, any of the directors present, may act as “Lead Director” and shall automatically take over the leadership in the meeting of the Board. The following are the conditions upon which this provision would apply:

i. Physical absence; ii. Conflict of interests; or

iii. As the Board may deem necessary.

f. It is also strongly desired to have a Chairman who, among other traits, possesses the following:

i. Wide experience, preferably at board level, in successful organizations;

ii. Capacity for strategic thinking and ability to make quick and important decisions;

iii. Working understanding of finance as well as accounts and reports systems;

iv. Excellent leadership and communication skills;

v. Appropriate training in corporate governance and professional directorship; and

vi. Limited number of other directorships.

reasonable interpretation of the Board’s directions, the President is authorized to establish all further policies, make all decisions, take all actions, establish all practices, and develop all initiatives. c. Only decisions of the Board acting as a body are binding upon the President. d. Decisions or instructions of individual board members, officers, or committees are not binding on the President except in rare circumstances when the Board has specifically authorized such exercise of authority. e. In the case of board members or committees requesting information or assistance without board authorization, the President can refuse such requests that require – in the President’s judgment – a material amount of staff time or funds or are disruptive.

Deliverables (as enumerated above) (as enumerated above)

Source: Article III of the By-laws

Board Protocol

3) Explain how the board of directors plan for the succession of the CEO/Managing Director/President and the top key management positions?

The Company has in place the Aboitiz Talent Management Program (ATMP). This program addresses the top executive succession planning and group-wide organizational executive and management bench. The

18

program guidelines and developments are presented and reviewed by the Board Corporate Governance Committee.

4) Other Executive, Non-Executive and Independent Directors

Does the company have a policy of ensuring diversity of experience and background of directors in the board? Please explain.

It is the policy of the Company to nominate and elect directors who represent a mix of highly competent directors and officers with in-depth knowledge and experience in the core industries of AEV or corporate management and financial expertise valuable to the Company. Other factors considered are independent- mindedness, ethical behavior and value contribution. The Company follows a formal and transparent board nomination and election process to ensure protection of the interests of all shareholders. Any shareholder may nominate a director and Independent Director. Nominees for directors are submitted to the Board Corporate Governance Committee (to which the Nominations and Compensation Committee has been merged into). The overall procedure is in compliance with the Amended Implementing Rules and Regulations of the Securities Regulation Code.

Does it ensure that at least one non-executive director has an experience in the sector or industry the company belongs to? Please explain.

The Company’s selection process ensures that at least one non-executive director has experience in the industries the Company operates in. For example, Mr. Antonio R. Moraza, who has been a non-executive director of the Company since 2009, is concurrently the President and Chief Operating Officer of Aboitiz Power Corporation, one of the Company’s subsidiaries engaged in its main business of power generation and distribution. Moreover, Messrs. Justo A. Ortiz and Stephen T. CuUnjieng, who are likewise non-executive directors of the Company, have extensive banking experience relevant to the Company’s banking unit.

Define and clarify the roles, accountabilities and deliverables of the Executive, Non-Executive and Independent Directors:

Executive Non-Executive Independent Director

Role A director’s office is one of trust and confidence. A director shall act in the best interest of AEV in a manner characterized by transparency, accountability and fairness. He should also exercise leadership, prudence and integrity in directing AEV towards sustained progress. It shall be the Board’s responsibility to foster the long-term success of AEV and secure its sustained competitiveness in a manner consistent with its fiduciary responsibility, which it shall exercise in the best interest of AEV, its shareholders and stakeholders.

A director’s office is one of trust and confidence. A director shall act in the best interest of AEV in a manner characterized by transparency, accountability and fairness. He should also exercise leadership, prudence and integrity in directing AEV towards sustained progress. It shall be the Board’s responsibility to foster the long-term success of AEV and secure its sustained competitiveness in a manner consistent with its fiduciary responsibility, which it shall exercise in the best interest of AEV, its shareholders and stakeholders.

A director’s office is one of trust and confidence. A director shall act in the best interest of AEV in a manner characterized by transparency, accountability and fairness. He should also exercise leadership, prudence and integrity in directing AEV towards sustained progress. It shall be the Board’s responsibility to foster the long-term success of AEV and secure its sustained competitiveness in a manner consistent with its fiduciary responsibility, which it shall exercise in the best interest of AEV, its shareholders and stakeholders.

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Accountabilities A director shall comply with the following duties and responsibilities: a) Conduct fair business transactions with AEV and ensure that personal interest does not bias Board decisions. The basic principle to be observed is that a director should not use his position to profit or gain some benefit or advantage for himself and/or his related interests. He should avoid situations that may compromise his impartiality. If an actual or potential conflict of interest may arise on the part of a director, he should fully and immediately disclose it and should not participate in the decision-making process. A director who has a continuing material conflict of interest should seriously consider resigning from his position. A conflict of interest shall be considered material if the director’s personal or business interest is antagonistic to that of AEV, or stands to acquire or gain financial advantage at the expense of AEV. b) Devote time and attention necessary to properly discharge his duties and responsibilities. A director should devote sufficient time to familiarize himself with AEV’s business. He should be constantly

A director shall comply with the following duties and responsibilities: a) Conduct fair business transactions with AEV and ensure that personal interest does not bias Board decisions. The basic principle to be observed is that a director should not use his position to profit or gain some benefit or advantage for himself and/or his related interests. He should avoid situations that may compromise his impartiality. If an actual or potential conflict of interest may arise on the part of a director, he should fully and immediately disclose it and should not participate in the decision-making process. A director who has a continuing material conflict of interest should seriously consider resigning from his position. A conflict of interest shall be considered material if the director’s personal or business interest is antagonistic to that of AEV, or stands to acquire or gain financial advantage at the expense of AEV. b) Devote time and attention necessary to properly discharge his duties and responsibilities. A director should devote sufficient time to familiarize himself with AEV’s business. He should be constantly

The independent director has the same duties and responsibilities as the executive and non-executive directors. In addition, independent directors have the additional responsibility to “bring fully to the Board the benefit of the particular experience or expertise that encouraged the invitation to become a Board member, at the same time not feeling constrained to contribute on matters that may be outside personal experience and expertise.”

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aware of and knowledgeable with AEV’s operations to enable him to meaningfully contribute to the Board’s work. He should attend and actively participate in Board and committee meetings, review meeting materials and, if called for, ask questions or seek explanation. c) Act judiciously. Before deciding on any matter brought before the Board, a director should carefully evaluate the issues and, if necessary, make inquiries and request clarification. d) Exercise independent judgment. A director should view each problem or situation objectively. If a disagreement with other directors arises, he should carefully evaluate and explain his position. He should not be afraid to take an unpopular position. Corollarily, he should support plans and ideas that he thinks are beneficial to AEV. e) Have a working knowledge of the statutory and regulatory requirements affecting AEV, including the contents of its Articles of Incorporation and By-Laws, the requirements of the SEC, and where applicable, the requirements of other regulatory agencies. A director should also keep abreast with industry developments

aware of and knowledgeable with AEV’s operations to enable him to meaningfully contribute to the Board’s work. He should attend and actively participate in Board and committee meetings, review meeting materials and, if called for, ask questions or seek explanation. c) Act judiciously. Before deciding on any matter brought before the Board, a director should carefully evaluate the issues and, if necessary, make inquiries and request clarification. d) Exercise independent judgment. A director should view each problem or situation objectively. If a disagreement with other directors arises, he should carefully evaluate and explain his position. He should not be afraid to take an unpopular position. Corollarily, he should support plans and ideas that he thinks are beneficial to AEV. e) Have a working knowledge of the statutory and regulatory requirements affecting AEV, including the contents of its Articles of Incorporation and By-Laws, the requirements of the SEC, and where applicable, the requirements of other regulatory agencies. A director should also keep abreast with industry developments

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and business trends in order to promote AEV’s competitiveness. The Corporate Information Officer shall ensure that directors and officers shall be updated on their corporate duties and responsibilities and on current relevant laws, rules and jurisprudence, and best business practices. f) Observe confidentiality. A director should keep secure and confidential all non-public information he may acquire or learn by reason of his positions as director. He should not reveal confidential information to unauthorized persons without the authority of the Board. g) Keep abreast of good corporate governance practices. A Director shall undergo a seminar on corporate governance principles, on relevant laws and charters applicable to the Company and the Board, and on the various businesses of the Company upon appointment to the Board.

and business trends in order to promote AEV’s competitiveness. The Corporate Information Officer shall ensure that directors and officers shall be updated on their corporate duties and responsibilities and on current relevant laws, rules and jurisprudence, and best business practices. f) Observe confidentiality. A director should keep secure and confidential all non-public information he may acquire or learn by reason of his positions as director. He should not reveal confidential information to unauthorized persons without the authority of the Board. g) Keep abreast of good corporate governance practices. A Director shall undergo a seminar on corporate governance principles, on relevant laws and charters applicable to the Company and the Board, and on the various businesses of the Company upon appointment to the Board.

Deliverables (as enumerated above) (as enumerated above) (as enumerated above)

Source: Amended Manual of Corporate Governance AEV Board Protocol

Provide the company’s definition of "independence" and describe the company’s compliance to the definition.

The Company uses the definition of independence of the SEC which is "a person other than an officer or employee of the Company, its parent or subsidiaries, or any other individual having a relationship with the Company, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.” To ensure compliance with the said definition, the Corporate Governance Committee adopted its own guidelines on the nomination of the Company's independent directors, which includes a list of qualifications and disqualifications for independent members of the Board. The said

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committee pre-screens and shortlists all candidates nominated to become a member of the board of directors in accordance with a list of qualifications and disqualifications provided in its guidelines.

Does the company have a term limit of five consecutive years for independent directors? If after two years, the company wishes to bring back an independent director who had served for five years, does it limit the term for no more than four additional years? Please explain.

The Company adopted SEC Memorandum Circular No. 9, Series of 2011, regarding Term Limits for Independent Directors, which allow an Independent Director to serve for two terms of five (5) consecutive years each, provided there is a two-year cooling off period in between the terms. This circular aims to enhance the effectiveness of Independent Directors and encourage the infusion of fresh ideas into the Board of Directors. In compliance with the said Memorandum, the Board Corporate Governance Committee regularly monitors the tenure of the Company’s Independent Directors.

5) Changes in the Board of Directors (Executive, Non-Executive and Independent Directors)

(a) Resignation/Death/Removal

Indicate any changes in the composition of the Board of Directors that happened during the period:

Name Position Date of Cessation Reason

N/A N/A N/A N/A

(b) Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement and Suspension

Describe the procedures for the selection/appointment, re-election, disqualification, removal, reinstatement and suspension of the members of the Board of Directors. Provide details of the processes adopted (including the frequency of election) and the criteria employed in each procedure:

Procedure Process Adopted Criteria

a. Selection/Appointment (i) Executive Directors

“Nominations for the election of directors for the ensuing year must be received by the Corporate Secretary no less than fifteen (15) working days prior to the annual meeting of stockholders, except as may be provided by the Board of Directors in appropriate guidelines that it may promulgate from time to time in compliance with law.”

A member of the Board must be: a) a holder of at least one (1) share of stock of AEV; b) at least a college graduate or have sufficient experience in managing the business to substitute for such formal education; c) at least twenty one (21) years old; d) proven to possess integrity and probity; e) have no conflict of interest; f) able to devote his time in fulfilling his duties and responsibilities as Director; g) has practical

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understanding of the businesses of AEV; h) membership in good standing in relevant industry, business or professional organizations; and i) has previous business experience.

(ii) Non-Executive Directors Same as above Same as above

(iii) Independent Directors Nominations for independent directors are accepted starting January 1 of the year in which such nominee director is to serve and every year thereafter, with the table for nominations to be closed by February 15 of the same year.

Same as above

b. Re-appointment

(i) Executive Directors “Nominations for the election of directors for the ensuing year must be received by the Corporate Secretary no less than fifteen (15) working days prior to the annual meeting of stockholders, except as may be provided by the Board of Directors in appropriate guidelines that it may promulgate from time to time in compliance with law.”

A member of the Board must be: a) a holder of at least one (1) share of stock of AEV; b) at least a college graduate or have sufficient experience in managing the business to substitute for such formal education; c) at least twenty one (21) years old; d) proven to possess integrity and probity; e) have no conflict of interest; f) able to devote his time in fulfilling his duties and responsibilities as Director; g) has practical understanding of the businesses of AEV; h) membership in good standing in relevant industry, business or professional organizations; and i) has previous business experience.

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Same as above

c. Permanent Disqualification (i) Executive Directors The Compliance Officer shall

be responsible for determining violation/s through notice and hearing and shall recommend to the Chairman of the Board the imposable penalty for such violation, for further review and approval of the Board.

The following shall be grounds for the permanent disqualification of a director: a) Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that (a) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (b) arises out of the person's conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (c) arises out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house or as affiliated person of any of them; b) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the SEC or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of

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the capacities mentioned in sub-paragraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities. The disqualification shall also apply if such person is currently the subject of an order of the SEC or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the SEC or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by the SEC or BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization; c) Any person finally convicted judicially or by competent administrative body of an offense involving moral turpitude or fraudulent act or transgressions; d) Any person finally found by the SEC or a court or other administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of, any provision of the Securities Regulation Code, the Corporation Code, or any other law administered by the SEC or BSP, or any rule, regulation or order of the SEC or BSP; e) Any person judicially

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declared to be insolvent; f) Any person finally found guilty by a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct listed in the foregoing paragraphs; and g) Conviction by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of the Corporation Code, committed within five (5) years prior to the date of his election or appointment.

(ii) Non-Executive Directors The Compliance Officer shall be responsible for determining violation/s through notice and hearing and shall recommend to the Chairman of the Board the imposable penalty for such violation, for further review and approval of the Board.

Same as above

(iii) Independent Directors The Compliance Officer shall be responsible for determining violation/s through notice and hearing and shall recommend to the Chairman of the Board the imposable penalty for such violation, for further review and approval of the Board.

In addition to the above grounds for disqualification of a director, an independent director shall be disqualified when: (a) the independent director becomes an officer or employee of AEV he shall be automatically disqualified from being an independent director; (b) If the beneficial equity ownership of an independent director in AEV or its subsidiaries and affiliates exceeds two percent (2%) of its subscribed capital stock. The disqualification shall be lifted if the limit is later complied with.

d. Temporary Disqualification (i) Executive Directors The Compliance Officer shall

be responsible for determining violation/s through notice and hearing and shall recommend to the Chairman of the Board

Any of the following shall be a ground for the temporary disqualification of a director: a) Refusal to fully

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the imposable penalty for such violation, for further review and approval of the Board.

disclose the extent of his business interest as required under the Securities Regulation Code and its Implementing Rules and Regulations. This disqualification shall be in effect as long as his refusal persists; b) Absence or non-participation for whatever reason for more than fifty percent (50%) of all meetings, both regular and special, of the Board of Directors during his incumbency, on any twelve (12) month period during said incumbency. This disqualification applies for purposes of the succeeding election; c) Dismissal from directorship in another listed corporation for cause. This disqualification shall be in effect until he has cleared himself of any involvement in the alleged irregularity; d) Being under preventive suspension by AEV; e) If the independent director becomes an officer or employee of AEV he shall be automatically disqualified from being an independent director; f) Conviction that has not yet become final referred to in the grounds for the disqualification of directors; and A temporarily disqualified director shall, within sixty (60) business days from such disqualification, take the appropriate actions to remedy or correct the disqualification. If he fails or refuses to do so for unjustified reasons, the disqualification shall become

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permanent.


Same as above


Same as above

e. Removal (i) Executive Directors The Compliance Officer shall


The commission of a third violation of the Company’s Manual of Corporate Governance by any member of the board of AEV or its subsidiaries and affiliates shall be a sufficient cause for removal from directorship.


Same as above


Same as above

f. Re-instatement (i) Executive Directors “Nominations for the election

of directors for the ensuing year must be received by the Corporate Secretary no less than fifteen (15) working days prior to the annual meeting of stockholders, except as may be provided by the Board of Directors in appropriate guidelines that it may promulgate from time to time in compliance with law.”

A member of the Board must be: a) a holder of at least one (1) share of stock of AEV; b) at least a college graduate or have sufficient experience in managing the business to substitute for such formal education; c) at least twenty one (21)

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years old; d) proven to possess integrity and probity; e) have no conflict of interest; f) able to devote his time in fulfilling his duties and responsibilities as Director; g) has practical understanding of the businesses of AEV; h) membership in good standing in relevant industry, business or professional organizations; and i) has previous business experience.



Same as above

g. Suspension (i) Executive Directors The Compliance Officer shall


Suspension from office shall be imposed in the case of a second violation. The duration of the suspension shall depend on the gravity of the violation.



(iii) Independent Directors The Compliance Officer shall be responsible for determining violation/s through notice and hearing and shall recommend to the Chairman of the Board the imposable penalty for such violation, for further review


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and approval of the Board.

Source: Article I, Section 7 of the Company’s Amended By-Laws Amended Manual of Corporate Governance Guidelines for the Nomination and Election of Independent Directors

Voting Result of the last Annual General Meeting

Name of Director Votes Received Jon Ramon Aboitiz 4,866,703,828 Erramon I. Aboitiz 4,871,039,205 Roberto E. Aboitiz 4,866,840,523 Enrique M. Aboitiz, Jr. 4,868,807,191 Justo A. Ortiz 4,866,320,630 Antonio R. Moraza 4,868,005,113 Jose C. Vitug 4,889,329,182 Stephen T. CuUnjieng 4,889,329,182 Raphael P.M. Lotilla 4,889,329,182

(May 19, 2014 Annual Stockholders’ Meeting)

6) Orientation and Education Program

(a) Disclose details of the company’s orientation program for new directors, if any.

All newly elected directors undergo a director’s orientation program provided by independent service providers and other training programs that will enhance their understanding of roles and develop their technical knowledge to discharge their functions effectively. In addition, regular seminars and briefings are conducted during Board meetings regarding the Company’s business especially geared towards familiarizing new directors with the Company’s business environment. Newly-elected directors are likewise provided with copies of all company policies prior to their assumption of their new positions.

(b) State any in-house training and external courses attended by Directors and Senior Management3 for the

past three (3) years:

To improve Board knowledge depth and efficiency of its Members, members of the Board attend various training seminars. In 2012, the members of the Board and Senior Management attended the Philippine Economic Briefing, Ancillary Services Agreement Briefings, and the (AON) Directors & Officers – Liability Insurance Briefing. In line with the Company’s efforts at sustainability, to go paperless and achieve better efficiency, the Board and its key officers also underwent a Boardbooks User Training program to embrace new technology designed to efficiently access board meeting materials and create an online Board resource center.

(c) Continuing education programs for directors: programs and seminars and roundtables attended during the

year.

Name of Director/Officer Date of Training Program Name of Training

Institution All Directors and March 2013 Aon Risk Maturity Index Company-sponsored

3 Senior Management refers to the CEO and other persons having authority and responsibility for planning, directing and controlling the activities of the company.

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Senior Officers Assessment

All Directors and Senior Officers July 16, 2013 Internal Audit and Risk

Management Forum Company-sponsored

All Directors and Senior Officers

September 26, 2013

Briefing on Open Access, Mindanao Interim Electricity Market and Line Charges Rental

Company-sponsored

All Directors December 16, 2013 Board Retreat Company-sponsored

Senior Officers July 18, 2014 Leadership Circle Clifford Scott, Catalyst Leadership

All Directors and Key Officers July 24, 2014 Corporate Governance

Seminar Institute of Corporate Directors

Senior Officers September 1-3, 2014

Decision Process International Strategy Workshop

Decision Process International, Singapore

All Directors September 25, 2014

Credit Suisse Economic Briefing Company-sponsored

All Directors and Key Officers

September 25, 2014

Reputation Survey Results Presentation Company-sponsored

B. CODE OF BUSINESS CONDUCT & ETHICS 1) Discuss briefly the company’s policies on the following business conduct or ethics affecting directors, senior

management and employees:

The Company’s Code of Ethics and Business Conduct is applicable to all directors, officers and all members of the organization.

Business Conduct &

Ethics Directors Senior Management Employees

(a) Conflict of Interest All employees, officers and directors have an obligation to act in the best interests of the Company. They should avoid any activity, interest, or association outside the Company that could impair their ability to perform their work objectively and effectively or that could give the appearance of interfering with their responsibilities on behalf of the Company or its clients. It is not possible to describe every situation in which a conflict of interest may arise. The following, however, are examples of situations that may raise a conflict

All employees, officers and directors have an obligation to act in the best interests of the Company. They should avoid any activity, interest, or association outside the Company that could impair their ability to perform their work objectively and effectively or that could give the appearance of interfering with their responsibilities on behalf of the Company or its clients. It is not possible to describe every situation in which a conflict of interest may arise. The following, however, are examples of situations that may raise a conflict

All employees, officers and directors have an obligation to act in the best interests of the Company. They should avoid any activity, interest, or association outside the Company that could impair their ability to perform their work objectively and effectively or that could give the appearance of interfering with their responsibilities on behalf of the Company or its clients. It is not possible to describe every situation in which a conflict of interest may arise. The following, however, are examples of situations that may raise a conflict

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of interest (unless permitted by law and Company policies): 1. Accepting special

favors as a result of a member’s position with the Company from any person or organization with which the Company has a current or potential business relationship

2. Competing with the Company for the purchase or sale of property, services, or other interests.

3. Acquiring an interest in a transaction involving the Company, a customer, or supplier (not including routine investments in publicly traded companies).

4. Receiving a personal loan or guarantee of an obligation as a result of a member’s position with the Company.

5. Working for a competitor while an employee of the Company.

6. Directing business to a supplier owned or managed by, or which employs, a relative or friend.

Directors should also disclose any actual or potential conflicts of interest to the Chairman of the Board and the Compliance Officer, who shall determine the appropriate resolution. All directors must recuse themselves from any Board discussion or decision affecting their personal, business or professional interests.








Employees and officers should promptly report any potential relationships, actions or transactions (including those involving family members) that reasonably could be expected to give rise to a conflict of interest to Human Resources Department. Involvement in certain outside activities may also








Employees and officers should promptly report any potential relationships, actions or transactions (including those involving family members) that reasonably could be expected to give rise to a conflict of interest to Human Resources Department. Involvement in certain outside activities may also

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require the prior approval of the Company (particularly if you are a licensed person). You should consult policies applicable to your business unit or Division for specific reporting and approval procedures.

require the prior approval of the Company (particularly if you are a licensed person). You should consult policies applicable to your business unit or Division for specific reporting and approval procedures.

(b) Conduct of Business and Fair Dealings

The Company seeks to outperform its competition fairly and honestly through superior performance. Every employee, officer and director must therefore always keep the best interests of the Company's clients paramount and endeavor to deal fairly with suppliers, competitors, the public and one another. No one should take unfair advantage of anyone through manipulation, abuse of privileged information, misrepresentation of facts or any other unfair dealing practice.



(c) Receipt of gifts from third parties

Gifts and entertainment may create an inappropriate expectation or feeling of obligation. An employee and members of his family may not accept gifts or special favors (other than an occasional non-cash gift of nominal value) from any person or organization with which the Company has a current or potential business relationship. Further, business gifts to, and entertainment of, non-government employees in connection with business discussions or the development of business relationships are only appropriate if they are in the ordinary course of business and their value is modest. If a

Gifts and entertainment may create an inappropriate expectation or feeling of obligation. You and members of his family may not accept gifts or special favors (other than an occasional non-cash gift of nominal value) from any person or organization with which the Company has a current or potential business relationship. Further, business gifts to, and entertainment of, non-government employees in connection with business discussions or the development of business relationships are only appropriate if they are in the ordinary course of business and their value is modest. If a

Gifts and entertainment may create an inappropriate expectation or feeling of obligation. You and members of his family may not accept gifts or special favors (other than an occasional non-cash gift of nominal value) from any person or organization with which the Company has a current or potential business relationship. Further, business gifts to, and entertainment of, non-government employees in connection with business discussions or the development of business relationships are only appropriate if they are in the ordinary course of business and their value is modest. If a

34

member has any questions about the appropriateness of a business gift or expense, he should contact the Human Resources Department.



(d) Compliance with Laws & Regulations

As a publicly-listed holding company, AEV is subject to numerous laws and regulations. It is every member’s responsibility to know and understand the laws applicable to his job responsibilities and to comply with both the letter and the spirit of these laws. This requires that every member avoid not only actual misconduct but also even the appearance of impropriety. Every member should assume that any action he takes ultimately could be publicized, and consider how he and the Company would be perceived. When in doubt, stop and reflect. Ask questions. The Company strongly encourages every member to discuss freely any concerns. In particular, if a member is unclear about the applicability of the law to his job responsibilities, or if he is unsure about the legality or integrity of a particular course of action, he should seek the advice of his supervisor or the Legal or Human Resources Department. A member should never assume that an activity is acceptable merely because others in the industry engage in it. A member is encouraged to trust his instincts—if something does not appear to be lawful or



35

ethical, it may not be. ethical, it may not be. ethical, it may not be. (e) Respect for Trade

Secrets/Use of Non-public Information

Proprietary and confidential information generated and gathered in the business is a valuable Company asset. Protecting this information is critical to the Company's reputation for integrity and its relationship with its clients, and ensures compliance with the complex regulations governing the financial services industry. Accordingly, every member should maintain all proprietary and confidential information in strict confidence, except when disclosure is authorized by the Company or required by law. "Proprietary information" includes all non-public information that might be useful to competitors or that could be harmful to the Company or its customers if disclosed. It includes, for example, intellectual property, business plans, personal employee information and unpublished financial information. You should also respect the property rights of other companies. "Confidential information" is information that is not generally known to the public about the Company, its clients, or other parties with whom the Company has a relationship and that have an expectation of confidentiality. Unauthorized use or distribution of proprietary or confidential information violates Company policy



36

and could be illegal. Such use or distribution could result in negative consequences for both the Company and the individuals involved, including potential legal and disciplinary actions. Every member’s obligation to protect the Company's proprietary and confidential information continues even after he leaves the Company, and he must return all such information in his possession upon his departure.



(f) Use of Company Funds, Assets and Information

Company policies regulate use of the Company's systems, including telephones, computer networks, electronic mail and remote access capabilities. Generally, every member should use the Company's systems and property only for legitimate Company business. Under no conditions may a member use the Company's systems to view, store, or send unlawful, offensive or other inappropriate materials. Every member may obtain copies of the Company's policies from the Human Resources Department. In addition, protecting Company assets against loss, theft, waste, or other misuse is the responsibility of every employee, officer and director. Any suspected misuse should be reported to his supervisor or the Legal, Administrative, or Human Resources Department (if appropriate).



(g) Employment & The Company is The Company is The Company is

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Labor Laws & Policies

committed to conducting its business in compliance with all applicable environmental and workplace health and safety laws and regulations. The Company strives to provide a safe and healthy work environment for all members and to avoid adverse impact and injury to the environment and communities in which it conducts its business. Achieving this goal is the responsibility of all employees, officers, and directors.



(h) Disciplinary action To strictly observe and implement the provisions of this manual, the following penalties shall be imposed, after notice and hearing, on AEV’s directors, officers, staff, subsidiaries and affiliates and their respective directors, officers and staff in case of violation of any of the provision of this Manual: 1. In the case of a first violation, the subject person shall be reprimanded. 2. Suspension from office shall be imposed in the case of a second violation. The duration of the suspension shall depend on the gravity of the violation. 3. For a third violation, the maximum penalty of removal from office shall be imposed.

If you are an employee or officer, this Code forms part of the terms and conditions of your employment at the Company. Employees, officers and directors are expected to cooperate in internal investigations of allegations of violations of the Code, and actual violations may subject you to the full range of disciplinary action by the Company. The Company may also report certain activities to its regulators, which could give rise to regulatory or criminal investigations. The penalties for regulatory and criminal violations may include significant fines, permanent bar from employment in the securities industry and, for criminal violations, imprisonment.

If you are an employee or officer, this Code forms part of the terms and conditions of your employment at the Company. Employees, officers and directors are expected to cooperate in internal investigations of allegations of violations of the Code, and actual violations may subject you to the full range of disciplinary action by the Company. The Company may also report certain activities to its regulators, which could give rise to regulatory or criminal investigations. The penalties for regulatory and criminal violations may include significant fines, permanent bar from employment in the securities industry and, for criminal violations, imprisonment.

(i) Whistle Blower All directors, officers and employees are the Company's first line of defense against unethical business practices and violations of the law. If any member observes or

All directors, officers and employees are the Company's first line of defense against unethical business practices and violations of the law. If any member observes or

All directors, officers and employees are the Company's first line of defense against unethical business practices and violations of the law. If any member observes or

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becomes aware of any conduct that he believes is unethical or unlawful—whether by another employee, a consultant, supplier, client, or other third party— he must communicate that information to his direct supervisor or, if appropriate or necessary, senior management. They will notify and consult with Legal, Compliance, or Corporate Security, and take appropriate steps to stop the misconduct and prevent its recurrence. If appropriate or necessary, the member may also raise his concerns directly with Law, Compliance or Corporate Security. Supervisors have an additional responsibility to take appropriate steps to stop any misconduct that they are aware of, and to prevent its recurrence. Supervisors that do not take appropriate action may be held responsible for failure to supervise properly. Members who prefer to report an allegation anonymously must provide enough information about the incident or situation to allow the Company to investigate properly. AEV does not tolerate any kind of retaliation for reports or complaints regarding the misconduct of others that were made in good faith. Open communication of issues and concerns by all employees without fear of retribution or retaliation is vital to the



39

continued success of the Company. Unless appropriate Company management learns of a problem, the Company cannot deal with it. Concealing improper conduct often compounds the problem and may delay or hamper responses that could prevent or mitigate actual damage.



(j) Conflict Resolution The Company has in place a policy of “Talk to the CEO” through which any team member or team leader can e-mail the CEO for any matter including whistle-blowing agenda items.

The Company has in place a policy of “Talk to the CEO” through which any team member or team leader can e-mail the CEO for any matter including whistle-blowing agenda items.

The Company has in place a policy of “Talk to the CEO” through which any team member or team leader can e-mail the CEO for any matter including whistle-blowing agenda items.

2) Has the code of ethics or conduct been disseminated to all directors, senior management and employees?

The Company’s Code of Ethics and Conduct and Manual of Corporate Governance are easily accessible from the Company’s website. New employees are required to undergo a New Hires Orientation Program (NHO) where the Company’s Code of Ethics and Business Conduct is extensively discussed. Hard copies of the same are also made available by the Company prior to the onboarding of directors, senior management and employees. In December 2013, the Office of the Compliance Officer launched its online Corporate Governance E-learning Course for all employees. This mandatory course is taken by all employees through a web-based portal and application with a standard test, the results of which are reported to Management and the Board Corporate Governance Committee. This mandatory online seminar is conducted to impress upon or refresh all employees’ awareness and understanding of the Manual and the Code and the underlying principles of corporate governance and ethical behavior and conduct for the Company. The Company likewise conducts a yearly seminar for all employees, referred to as Quality Focus, where the salient provisions of the Code of Ethics and other company policies are discussed.

3) Discuss how the company implements and monitors compliance with the code of ethics or conduct.

The Company recognizes that the employees are the Company’s first line of defense against unethical business practices and violations of the law. The Company’s Code of Ethics and Business Conduct provide the following:

“If you observe or become aware of any conduct that you believe is unethical or unlawful—whether by another employee, a consultant, supplier, client, or other third party—you must communicate that information to your direct supervisor or, if appropriate or necessary, senior management. They will notify and consult with Law, Compliance, or Corporate Security, and take appropriate steps to stop the misconduct and prevent its recurrence. If appropriate or necessary, you may also raise your concerns directly with Law, Compliance or Corporate Security. If you are a supervisor, you have an additional responsibility to take appropriate steps to stop any misconduct that you are aware of, and to prevent its recurrence. Supervisors that do not take appropriate action may be held responsible for failure to supervise properly. If you prefer to report an allegation anonymously, you must provide enough information about the

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incident or situation to allow the Company to investigate properly. AEV will not tolerate any kind of retaliation for reports or complaints regarding the misconduct of others that were made in good faith. Open communication of issues and concerns by all employees without fear of retribution or retaliation is vital to the continued success of the Company. Unless appropriate Company management learns of a problem, the Company cannot deal with it. Concealing improper conduct often compounds the problem and may delay or hamper responses that could prevent or mitigate actual damage.”

To enforce the above provision, the Company has a Lex Committee (LexCom) composed of the Chief Compliance Officer, Chief Finance Officer, Chief Human Resources Officer, and members of the Legal and Corporate Services Team. The LexCom initiates the formal adoption of the Company’s Code and proper conduct that guides individual behavior and decision-making, clarifies responsibilities, and informs other stakeholders on the conduct expected from company personnel. The LexCom sets the policies and procedures for curbing and penalizing company or employee involvement in unethical behavior, such as offering, paying and receiving inappropriate rewards. The Office of the Chief Legal Officer is responsible for ensuring compliance by the Company, subsidiaries and affiliates, with all relevant laws, rules and regulations, as well as all regulatory requirements, including the protection and respect for intellectual property rights. The LexCom is responsible for the comprehensive legal compliance program of the Company. As part of its program, the LexCom and the Office of the Chief Legal Officer oversee the appropriate training and awareness initiatives to facilitate understanding, acceptance and compliance with the said issuances by the employees and the business units (BUs).

In addition to the foregoing, In case of violation of company policies, team leaders of erring members concerned is empowered and obligated to report the violation to the Human Resources Department for proper action. In February 27, 2014, the Company also formally adopted its Whistleblowing Policy to encourage all employees to report any illegal or unethical practices in the Company. To provide employees several avenues to report illegal or unethical activities, the Policy allows reporting to any of the following: Chairman of the Board of Directors, Chief Executive Officer, Direct Supervisor, Human Resources Department, and Legal Department. (Updated as of December 31, 2014)

4) Related Party Transactions

(a) Policies and Procedures

Describe the company’s policies and procedures for the review, approval or ratification, monitoring and recording of related party transactions between and among the company and its parent, joint ventures, subsidiaries, associates, affiliates, substantial stockholders, officers and directors, including their spouses, children and dependent siblings and parents and of interlocking director relationships of members of the Board.

Related Party Transactions Policies and Procedures

(1) Parent Company The Company fully records, monitors, and discloses all related-party transactions regardless of amounts in compliance with existing Philippine financial accounting standards. The nature and extent of transactions with affiliated and related parties are disclosed annually to shareholders through the Company’s Information Statement, Annual Report and Audited Financial Statements. The Company and its subsidiaries enter into related party transactions consisting of payment of shareholder advances,

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professional fees and rental fees. These are made on an arm’s length basis and at current market prices at the time of the transactions. Service and management contracts are also entered into with subsidiaries and affiliates for corporate center services, such as human resources support services, internal audit services, legal and corporate compliance services, treasury and corporate finance services, technology infrastructure services. These services are obtained from the Company to enable the Aboitiz group of companies to realize cost synergies. The Company maintains a pool of highly qualified professionals with in-depth business expertise specific to the businesses of the AEV organization. Transactions are priced on a cost recovery basis. In addition, transaction costs are always benchmarked to third party rates to ensure competitive pricing. Service Level Commitments and Agreements are executed to ensure quality and timeliness of services.

(2) Joint Ventures The Company fully records, monitors, and discloses all related-party transactions regardless of amounts in compliance with existing Philippine financial accounting standards. The nature and extent of transactions with affiliated and related parties are disclosed annually to shareholders through the Company’s Information Statement, Annual Report and Audited Financial Statements. The Company and its subsidiaries enter into related party transactions consisting of payment of shareholder advances, professional fees and rental fees. These are made on an arm’s length basis and at current market prices at the time of the transactions. Service and management contracts are also entered into with subsidiaries and affiliates for corporate center services, such as human resources support services, internal audit services, legal and corporate compliance services, treasury and corporate finance services, technology infrastructure services. These services are obtained from the Company to enable the Aboitiz group of companies to realize cost synergies. The Company maintains a pool of highly qualified professionals with in-depth business expertise specific to the businesses of the AEV organization. Transactions are priced on a cost recovery basis. In addition, transaction costs are always benchmarked to third party rates to ensure competitive pricing. Service Level Commitments and Agreements are executed to ensure quality and timeliness of services.

(3) Subsidiaries The Company fully records, monitors, and discloses all related-party transactions regardless of amounts in compliance with existing Philippine financial accounting standards. The nature and extent of transactions with affiliated and related parties are disclosed annually to shareholders through the Company’s Information Statement, Annual Report and Audited Financial Statements. The Company and its subsidiaries enter into related party transactions consisting of payment of shareholder advances, professional fees and rental fees. These are made on an arm’s length basis and at current market prices at the time of the transactions. Service and management contracts are also entered into with subsidiaries and affiliates for corporate center services, such as human resources support services, internal audit services, legal and corporate compliance

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services, treasury and corporate finance services, technology infrastructure services. These services are obtained from the Company to enable the Aboitiz group of companies to realize cost synergies. The Company maintains a pool of highly qualified professionals with in-depth business expertise specific to the businesses of the AEV organization. Transactions are priced on a cost recovery basis. In addition, transaction costs are always benchmarked to third party rates to ensure competitive pricing. Service Level Commitments and Agreements are executed to ensure quality and timeliness of services.

(4) Entities Under Common Control The Company fully records, monitors, and discloses all related-party transactions regardless of amounts in compliance with existing Philippine financial accounting standards. The nature and extent of transactions with affiliated and related parties are disclosed annually to shareholders through the Company’s Information Statement, Annual Report and Audited Financial Statements. The Company and its subsidiaries enter into related party transactions consisting of payment of shareholder advances, professional fees and rental fees. These are made on an arm’s length basis and at current market prices at the time of the transactions. Service and management contracts are also entered into with subsidiaries and affiliates for corporate center services, such as human resources support services, internal audit services, legal and corporate compliance services, treasury and corporate finance services, technology infrastructure services. These services are obtained from the Company to enable the Aboitiz group of companies to realize cost synergies. The Company maintains a pool of highly qualified professionals with in-depth business expertise specific to the businesses of the AEV organization. Transactions are priced on a cost recovery basis. In addition, transaction costs are always benchmarked to third party rates to ensure competitive pricing. Service Level Commitments and Agreements are executed to ensure quality and timeliness of services.

(5) Substantial Stockholders The Company fully records, monitors, and discloses all related-party transactions regardless of amounts in compliance with existing Philippine financial accounting standards. The nature and extent of transactions with affiliated and related parties are disclosed annually to shareholders through the Company’s Information Statement, Annual Report and Audited Financial Statements. The Company and its subsidiaries enter into related party transactions consisting of payment of shareholder advances, professional fees and rental fees. These are made on an arm’s length basis and at current market prices at the time of the transactions. Service and management contracts are also entered into with subsidiaries and affiliates for corporate center services, such as human resources support services, internal audit services, legal and corporate compliance services, treasury and corporate finance services, technology infrastructure services. These services are obtained from the Company to enable the Aboitiz group of companies to realize cost synergies. The Company maintains a pool of highly qualified professionals with in-depth business expertise specific to the businesses of the AEV organization.

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Transactions are priced on a cost recovery basis. In addition, transaction costs are always benchmarked to third party rates to ensure competitive pricing. Service Level Commitments and Agreements are executed to ensure quality and timeliness of services.

(6) Officers including spouse/children/siblings/parents

Directors shall disclose to the Board, through the Company’s Corporate Secretary, details of all their other directorships and any shareholdings owned by them or members of their family. Any changes to these notifications must be communicated promptly to the Board of Directors through the Company’s Corporate Secretary. It is the responsibility of each director and senior manager to promptly notify the Board, through the Company’s Corporate Secretary, of any proposed related-party transaction as soon as they become aware of it. It is the responsibility of a director or senior manager who is involved in a proposed related-party transaction to inform the Board, through the Company’s Corporate Secretary, and obtain approval prior to entering into the transaction. Conflicted board members shall not participate in discussions on transactions in which they are a conflicted party and shall abstain from voting on such issues. The Board shall decide whether or not to approve the related party transaction involving a director in the absence of that director. In addition to the rules above, the Aboitiz Family Constitution provides policy rules for handling of corporate interest vis-à-vis the stakeholders of the Company. The Rule on Conflict of Interest applies to this group.

(7) Directors including spouse/children/siblings/parents

Directors shall disclose to the Board, through the Company’s Corporate Secretary, details of all their other directorships and any shareholdings owned by them or members of their family. Any changes to these notifications must be communicated promptly to the Board of Directors through the Company’s Corporate Secretary. It is the responsibility of each director and senior manager to promptly notify the Board, through the Company’s Corporate Secretary, of any proposed related-party transaction as soon as they become aware of it. It is the responsibility of a director or senior manager who is involved in a proposed related-party transaction to inform the Board, through the Company’s Corporate Secretary, and obtain approval prior to entering into the transaction. Conflicted board members shall not participate in discussions on transactions in which they are a conflicted party and shall abstain from voting on such issues. The Board shall decide whether or not to approve the related party transaction involving a director in the absence of that director. In addition to the rules above, the Aboitiz Family Constitution

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provides policy rules for handling of corporate interest vis-à-vis the stakeholders of the Company. The Rule on Conflict of Interest applies to this group.

(8) Interlocking director relationship of Board of Directors

The rule on interlocking director relationship is not applicable to directors elected to companies within the conglomerate of business. If outside the conglomerate, the policy is for full disclosure. The Company complies with the rule on approval of contracts between corporations with interlocking directors, as mandated by Section 33 of the Corporation Code.

Source: 2013 Full Corporate Governance Report

(b) Conflict of Interest

(i) Directors/Officers and 5% or more Shareholders

Identify any actual or probable conflict of interest to which directors/officers/5% or more shareholders may be involved.

Details of Conflict of Interest (Actual or Probable)

Name of Director/s None Name of Officer/s None Name of Significant Shareholders None

(ii) Mechanism

Describe the mechanism laid down to detect, determine and resolve any possible conflict of interest between the company and/or its group and their directors, officers and significant shareholders.

Directors/Officers/Significant Shareholders Company As provided in the Company’s Code of Ethics and Business

Conduct, employees and officers should promptly report any potential relationships, actions or transactions (including those involving family members) that reasonably could be expected to give rise to a conflict of interest to Human Resources Department. Involvement in certain outside activities may also require the prior approval of the Company (particularly if you are a licensed person). You should consult policies applicable to your business unit or Division for specific reporting and approval procedures. Directors should also disclose any actual or potential conflicts of interest to the Chairman of the Board and the Compliance Officer, who shall determine the appropriate resolution. All directors must recuse themselves from any Board discussion or decision affecting their personal, business or professional interests.

Group As provided in the Company’s Code of Ethics and Business Conduct, employees and officers should promptly report any potential relationships, actions or transactions (including those involving family members) that reasonably could be expected to give rise to a conflict of interest to Human Resources Department. Involvement in certain

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outside activities may also require the prior approval of the Company (particularly if you are a licensed person). You should consult policies applicable to your business unit or Division for specific reporting and approval procedures. Directors should also disclose any actual or potential conflicts of interest to the Chairman of the Board and the Compliance Officer, who shall determine the appropriate resolution. All directors must recuse themselves from any Board discussion or decision affecting their personal, business or professional interests.

5) Family, Commercial and Contractual Relations

(a) Indicate, if applicable, any relation of a family,4 commercial, contractual or business nature that exists between the holders of significant equity (5% or more), to the extent that they are known to the company:

The holders of significant equity in the Company, or stockholders with shareholdings of 5% or more of the total outstanding capital stock, are Aboitiz & Company, Inc., Ramon Aboitiz Foundation, Inc., PCD Nominee Corp (Filipino) and PCD Nominee Corp (Foreign).

Names of Related

Significant Shareholders Type of Relationship Brief Description of the Relationship

Aboitiz & Company, Inc. Investor- investee 49.3917% interest PCD Nominee Corp (Filipino) Investor- investee 9.7127% interest PCD Nominee Corp (Foreign) Investor- investee 10.5739% interest Ramon Aboitiz Foundation, Inc. Investor- investee 7.6651% interest

(Updated as of September 30,2014)

(b) Indicate, if applicable, any relation of a commercial, contractual or business nature that exists between the

holders of significant equity (5% or more) and the company:

Names of Related Significant Shareholders Type of Relationship Brief Description

Aboitiz & Company, Inc. Investor- investee Provides service for management of Retirement Plan.

(c) Indicate any shareholder agreements that may impact on the control, ownership and strategic direction of

the company:

Name of Shareholders % of Capital Stock affected (Parties)

Brief Description of the Transaction

None

6) Alternative Dispute Resolution

Describe the alternative dispute resolution system adopted by the company for the last three (3) years in amicably settling conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including regulatory authorities.

4 Family relationship up to the fourth civil degree either by consanguinity or affinity.

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Alternative Dispute Resolution System Corporation & Stockholders The Company has no shareholder

disputes. The Investor Relations Office is the go-to person for any issues of shareholders. The LexCom also reviews or recommends the appropriate dispute resolution system for conflicts and differences with counterparties, particularly with shareholders and other key stakeholders to ensure that they are settled in a fair and expeditious manner from the application of a law, rule or regulation especially when it refers to a corporate governance issue. The Office of the Chief Legal Officer explains the rationale for any such action as well present the specific steps being taken to finally comply with the applicable law, rule or regulation.

Corporation & Third Parties The Company is currently reviewing contracts providing for ADR.

Corporation & Regulatory Authorities Regulatory agencies provide the mechanisms for dispute resolution for the Company’s business units.

C. BOARD MEETINGS & ATTENDANCE 1) Are Board of Directors’ meetings scheduled before or at the beginning of the year?

The Company’s Board meetings are scheduled during the last Board meeting of the previous year. The schedule is disseminated at the beginning of the year to all members of the Board.

2) Attendance of Directors

Board Name Date of Election

No. of Meetings

Held during the year*

No. of Meetings Attended

%

Chairman Jon Ramon Aboitiz May 19, 2014 9 8 88.89% Member Erramon I. Aboitiz May 19, 2014 9 9 100% Member Roberto E. Aboitiz May 19, 2014 9 9 100% Member Enrique M. Aboitiz, Jr. May 19, 2014 9 6 66.67% Member Justo A. Ortiz May 19, 2014 9 8 88.89% Member Antonio R. Moraza May 19, 2014 9 7 77.78% Independent Jose C. Vitug May 19, 2014 9 9 100% Independent Stephen T. CuUnjieng May 19, 2014 9 9 100% Independent Raphael P.M. Lotilla May 19, 2014 9 9 100%

*For the period January- December 2014

3) Do non-executive directors have a separate meeting during the year without the presence of any executive? If yes, how many times?

As provided in the Company’s Board Protocol, the Company’s Independent Directors meet at least once a

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year for an Executive Session. The Independent Directors may also meet periodically in an executive session with no other Director or management present except for the Chairman of the Board Corporate Governance Committee who shall call for and preside the meeting. Topics for discussion during these executive sessions shall be determined by the Independent Directors, but actions of the Board generally should be taken separately during Board meetings.

4) Is the minimum quorum requirement for Board decisions set at two-thirds of board members? Please explain. In accordance with Section II Article 3 of the Company’s By-laws, a majority of the members of the Board shall constitute a quorum. This same requirement is in accordance with Section 25 of the Corporation Code.

5) Access to Information

(a) How many days in advance are board papers5 for board of directors meetings provided to the board?

In accordance with the Company’s Board Protocol Process Flow, the board materials of directors are provided to the Board at least five (5) calendar days prior to the board meeting. The Office of the Board Secretariat recently adopted the use of Diligent Boardbooks technology and platform to assist the Board in its work. The Boardbooks is a brand portal that looks and functions like a book of all Board materials in an IPAD or laptop. The application is used by the Board of Directors and its Committees during their actual meetings.

(b) Do board members have independent access to Management and the Corporate Secretary?

Members of the Board have access to Management and the Office of the Corporate Secretary. It is every Director’s duty to keep abreast of the recent developments in the Company and the Company encourages the members of the Board to obtain the necessary information from various sources, which include the Management and the Corporate Secretary.

(c) State the policy of the role of the company secretary. Does such role include assisting the Chairman in

preparing the board agenda, facilitating training of directors, keeping directors updated regarding any relevant statutory and regulatory changes, etc?

(1) In accordance with Article III, Section 3 of the Company’s By-laws, the Corporate Secretary shall keep the minutes of all the meetings of the stockholders and the Board of Directors. He shall have charge of the corporate seal, the stock certificate books and such other books and papers of the Corporation. He shall countersign with the President the certificate of stock issued as well as such other instruments which require his signature. He shall attend to the giving and serving of all notices required by the corporation law or by these By-laws. He shall also perform such other duties as are incident to his office and as the Board of Directors may from time to time direct.

(2) Also, the Company’s Manual of Corporate Governance provides that the Corporate

Secretary:

a) Gathers and analyzes all documents, records and other information essential to the conduct of his duties and responsibilities to AEV.

b) Is ultimately responsible for compliance with governmental reportorial requirements with the SEC, and with the Philippine Stock Exchange, among others

c) As to Board meetings, secures a complete schedule thereof at least for the current year and puts the Board on notice within a reasonable period before every meeting. He also prepares and issues the agenda in consultation with

5 Board papers consist of complete and adequate information about the matters to be taken in the board meeting. Information includes the background or explanation on matters brought before the Board, disclosures, budgets, forecasts and internal financial documents.

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senior management and ensures that the directors have before them accurate information that will enable them to arrive at intelligent decisions on matters that require their approval.

d) Assists the Board in making business judgments in good faith and in the performance of their responsibilities and obligations.

e) Attends all Board meetings and personally prepares the minutes of such meetings.

f) Responsible for the safekeeping and preservation of the integrity of the minutes of the meetings of the Board and its committees, as well as the other official records of AEV;

g) Ensures that all Board procedures, rules and regulations are strictly followed by the members.

(3) All Board meeting minutes and all resource and presentation materials are uploaded to

the Boardbooks and accessible by each Director on his iPad.

(d) Is the company secretary trained in legal, accountancy or company secretarial practices? Please explain should the answer be in the negative.

The incumbent Corporate Secretary, Ms. M. Jasmine S. Oporto, is a lawyer with extensive legal and corporate secretarial and compliance experience. Ms. Oporto, 55 years old, Filipino, has been the Corporate Secretary of AEV since 2004 and Compliance Officer since November 2005. She is concurrently the Senior Vice President - Chief Legal Officer. She is also Vice President for Legal Affairs of Davao Light & Power Company, Inc.; Chief Compliance Officer and Corporate Secretary of Aboitiz Power Corporation; and Assistant Corporate Secretary of Visayan Electric Company, Inc. and Hijos de F. Escaño, Inc. Prior to joining AEV, she worked in various capacities at the Hong Kong office of Kelley Drye & Warren, LLP, a New York- based law firm, and the Singapore-based consulting firm Albi Consulting Pte. Ltd. She obtained her Bachelor of Laws degree from the University of the Philippines and is a member of both the Philippine and New York bars. (Updated as of December 31, 2014)

(e) Committee Procedures

Disclose whether there is a procedure that Directors can avail of to enable them to get information necessary to be able to prepare in advance for the meetings of different committees:

Yes No

Committee Details of the procedures

Audit In accordance with the Company’s Board Protocol Process Flow, the board materials of directors are provided to the Board at least five (5) calendar days prior to the board meeting. The minutes and material of the previous meetings are also made available to the members of the Board through the Diligent Boardbooks application. The Company’s Corporate Center likewise updates members of the Board with recent developments significant to their practice through regular circulation of new laws, rules and regulations, and the like which may affect the workings of the board committees. All materials for the previous as well as future meetings are uploaded to the Boardbooks and are accessible by each Director on his iPad.

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Directors are likewise provided access to updates involving the Company and its subsidiaries through daily news updates circulated by electronic mail through the facility called Newswire. Directors are likewise given updates by the Company’s Legal Department on significant changes in laws and rules of regulatory agencies, such as tax and regulatory updates.

Corporate Governance Committee In accordance with the Company’s Board Protocol Process Flow, the board materials of directors are provided to the Board at least five (5) calendar days prior to the board meeting. The minutes and material of the previous meetings are also available to the members of the Board through the Diligent Boardbooks application. The Company’s Corporate Center likewise updates members of the Board with recent developments significant to their practice through regular circulation of new laws, rules and regulations, and the like which may affect the workings of the board committees. All materials for the previous as well as future meetings are uploaded to the Boardbooks and accessible by each Director on his iPad. Directors are likewise provided access to updates involving the Company and its subsidiaries through daily news updates circulated by electronic mail through the facility called Newswire. Directors are likewise given updates by the Company’s Legal Department on significant changes in laws and rules of regulatory agencies, such as tax and regulatory updates.

Risk and Reputation Management Committee

In accordance with the Company’s Board Protocol Process Flow, the board materials of directors are provided to the Board at least five (5) calendar days prior to the board meeting. The minutes and material of the previous meetings are also available to the members of the Board through the Diligent Boardbooks application. The Company’s Corporate Center likewise updates members of the Board with recent developments significant to their practice through regular circulation of new laws, rules and regulations, and the like which may affect the workings of the board committees. All materials for the previous as well as future meetings are uploaded to the Boardbooks and accessible by each Director on his iPad.

6) External Advice

Indicate whether or not a procedure exists whereby directors can receive external advice and, if so, provide details:

Procedures Details

The Office of the Chief Legal Officer provides assistance to directors if they need external advice. The Chief Legal Officer can refer directors to external resource persons or request for advice on behalf of the Board.

Electronic mail, personal discussions, seminars or presentations.

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Moreover, the Management regularly invites resource persons, who are experts in various fields such as risk, insurance, banking, etc., to conduct briefings or seminars on topics relevant to the Board.

7) Change/s in existing policies

Indicate, if applicable, any change/s introduced by the Board of Directors (during its most recent term) on existing policies that may have an effect on the business of the company and the reason/s for the change:

Existing Policies Changes Reason

Company’s Manual of Corporate Governance

Amendment of the Company’s Manual of Corporate Governance to incorporate revisions required by SEC Memorandum Circular No. 9, Series of 2014

To improve the Company’s corporate governance practices.

Implementation of the Approval and Decision Matrices of Authority

Adoption of Approval and Decision Matrices of Authority

To identify and limit approval and decision-making authority within the Group.

Approval of the Board Audit Committee Charter

Adoption of a new charter To assist the Board in making audit decisions effectively and in a timely manner.

Whistleblowing Policy Adoption of a new policy To provide an avenue for directors and employees to report on illegal or unethical conduct committed in relation to the Company

(Updated as of December 31, 2014)

D. REMUNERATION MATTERS 1) Remuneration Process

Disclose the process used for determining the remuneration of the CEO and the four (4) most highly compensated management officers:

Process CEO Top 4 Highest Paid Management Officers

(1) Fixed remuneration The Company rewards the individual directors and officers based on their stretched strategic goals and ability to execute their duties and responsibilities. AEV’s performance reward philosophy is based on objective performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its

The Company rewards the individual directors and officers based on their stretched strategic goals and ability to execute their duties and responsibilities. AEV’s performance reward philosophy is based on objective performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its

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officers competitively by comparing rates with other Philippine based companies through market salary surveys. Changes in Board compensation, if any, are recommended by the Board Corporate Governance Committee, approved by the Board and affirmed or voted on by the shareholders in the Annual Stockholders’ Meeting.

officers competitively by comparing rates with other Philippine based companies through market salary surveys. Changes in Board compensation, if any, are recommended by the Board Corporate Governance Committee, approved by the Board and affirmed or voted on by the shareholders in the Annual Stockholders’ Meeting.

(2) Variable remuneration The Company rewards the individual directors and officers based on their stretched strategic goals and ability to execute their duties and responsibilities. AEV’s performance reward philosophy is based on objective performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its officers competitively by comparing rates with other Philippine based companies through market salary surveys. Changes in Board compensation, if any, are recommended by the Board Corporate Governance Committee, approved by the Board and affirmed or voted on by the shareholders in the Annual Stockholders’ Meeting.

The Company rewards the individual directors and officers based on their stretched strategic goals and ability to execute their duties and responsibilities. AEV’s performance reward philosophy is based on objective performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its officers competitively by comparing rates with other Philippine based companies through market salary surveys. Changes in Board compensation, if any, are recommended by the Board Corporate Governance Committee, approved by the Board and affirmed or voted on by the shareholders in the Annual Stockholders’ Meeting.

(3) Per diem allowance The Company rewards the individual directors and officers based on their stretched strategic goals and ability to execute their duties and responsibilities. AEV’s performance reward philosophy is based on objective performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its officers competitively by comparing rates with other Philippine based companies through market salary surveys.

The Company rewards the individual directors and officers based on their stretched strategic goals and ability to execute their duties and responsibilities. AEV’s performance reward philosophy is based on objective performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its officers competitively by comparing rates with other Philippine based companies through market salary surveys.

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Changes in Board compensation, if any, are recommended by the Board Corporate Governance Committee, approved by the Board and affirmed or voted on by the shareholders in the Annual Stockholders’ Meeting.

Changes in Board compensation, if any, are recommended by the Board Corporate Governance Committee, approved by the Board and affirmed or voted on by the shareholders in the Annual Stockholders’ Meeting.

(4) Bonus The Company rewards the individual directors and officers based on their stretched strategic goals and ability to execute their duties and responsibilities. AEV’s performance reward philosophy is based on objective performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its officers competitively by comparing rates with other Philippine based companies through market salary surveys. Changes in Board compensation, if any, are recommended by the Board Corporate Governance Committee, approved by the Board and affirmed or voted on by the shareholders in the Annual Stockholders’ Meeting.

The Company rewards the individual directors and officers based on their stretched strategic goals and ability to execute their duties and responsibilities. AEV’s performance reward philosophy is based on objective performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its officers competitively by comparing rates with other Philippine based companies through market salary surveys. Changes in Board compensation, if any, are recommended by the Board Corporate Governance Committee, approved by the Board and affirmed or voted on by the shareholders in the Annual Stockholders’ Meeting.

(5) Stock Options and other financial instruments

At present, AEV does not have any stock option or grants other financial instruments to its officers. AEV has a stock transfer program for key management position.

At present, AEV does not have any stock option or grants other financial instruments to its officers. AEV has a stock transfer program for key management position.

(6) Others (specify) NA NA 2) Remuneration Policy and Structure for Executive and Non-Executive Directors

Disclose the company’s policy on remuneration and the structure of its compensation package. Explain how the compensation of Executive and Non-Executive Directors is calculated.

Remuneration Policy

Structure of Compensation Packages

How Compensation is Calculated

Executive Directors The Board members’ remuneration is a form of reward and recognition to attract, retain and optimize the

To compensate Directors for their services rendered to the Company, they are entitled to a monthly allowance as approved by the shareholders. In

AEV rewards its individual Directors and Officers based on ability to execute his duties and responsibilities. It is AEV’s philosophy to

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directors who continually deliver quality services for the growth of the Company.

addition, each Director and the Chairman of the Board receives a per diem for every Board and Board Committee meeting attended. Directors who absent themselves during a particular Board meeting shall not be entitled to any meeting allowance. Such allowances shall be reviewed from time to time to ensure that these reflect the industry standards.

reward based on individual performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its directors and officers competitively by comparing rates with other Philippine-based companies through a market salary survey. Changes in Board compensation, if any, should come at the suggestion of the Committee but with full discussion and concurrence by the Board.

Non-Executive Directors The Board members’ remuneration is a form of reward and recognition to attract, retain and optimize the directors who continually deliver quality services for the growth of the Company.

To compensate Directors for their services rendered to the Company, they are entitled to a monthly allowance as approved by the shareholders. In addition, each Director and the Chairman of the Board receives a per diem for every Board and Board Committee meeting attended. Directors who absent themselves during a particular Board meeting shall not be entitled to any meeting allowance. Such allowances shall be reviewed from time to time to ensure that these reflect the industry standards.

AEV rewards its individual Directors and Officers based on ability to execute his duties and responsibilities. It is AEV’s philosophy to reward based on individual performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its directors and officers competitively by comparing rates with other Philippine-based companies through a market salary survey. Changes in Board compensation, if any, should come at the suggestion of the Committee but with full discussion and concurrence by the Board.

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Do stockholders have the opportunity to approve the decision on total remuneration (fees, allowances, benefits-in-kind and other emoluments) of board of directors? Provide details for the last three (3) years.

Shareholders approve any proposed compensation package of directors.

Remuneration Scheme Date of Stockholders’ Approval

No change in remuneration scheme. 2012-2014

Increased the monthly allowance and the per diem allowance of members of the Board in their attendance of board and committee meetings.

May 16, 2011

Increased the per diem allowance of members of the Board in their attendance of board and committee meetings.

May 17, 2010

(Updated as of December 31, 2014)

3) Aggregate Remuneration

Complete the following table on the aggregate remuneration accrued during the most recent year:

Remuneration Item Executive Directors Non-Executive Directors

(other than independent directors)

Independent Directors

(a) Fixed Remuneration

Chairman of the Board

NA Php150,000 NA

Board Member Php100,000 Php100,000 Php100,000

Board Committee Chairman

Php150,000 Php150,000 NA

Board Committee Member

Php100,000 Php100,000 Php100,000

(b) Variable Remuneration None None None

(c) Per diem Allowance

Chairman of the Board

NA Php150,000 NA

Board Member Php100,000 Php100,000 Php100,000

Board Committee Chairman

Php100,000 Php100,000 Php100,000

Board Committee Member

Php80,000 Php80,000 Php80,000

(d) Bonuses None None None

(e) Stock Options and/or other financial instruments

None None None

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(f) Others (Specify) None None None

Total

Other Benefits

Executive Directors

Non-Executive Director (other than independent

directors)

Independent Directors

1) Advances None None None

2) Credit granted None None None

3) Pension Plan/s Contributions None None None

(d) Pension Plans, Obligations incurred None None None

(e) Life Insurance Premium None None None

(f) Hospitalization Plan None None None

(g) Car Plan None None None (h) Others (Specify) Director and Officer Liability Insurance

Php400 million limit of liability for each loss per policy period, with additional Php40 million dedicated additional limit for each director or officer



Total

4) Stock Rights, Options and Warrants

(a) Board of Directors

Complete the following table, on the members of the company’s Board of Directors who own or are entitled to stock rights, options or warrants over the company’s shares:

At present, AEV does not grant any stock option to its directors or officers.

Director’s Name Number of Direct

Option/Rights/ Warrants

Number of Indirect

Option/Rights/ Warrants

Number of Equivalent

Shares

Total % from Capital Stock

NA NA NA NA NA

(b) Amendments of Incentive Programs

Indicate any amendments and discontinuation of any incentive programs introduced, including the criteria used in the creation of the program. Disclose whether these are subject to approval during the Annual Stockholders’ Meeting:

At present, AEV does not grant any incentive program, other than per diem allowance to its

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directors.

Incentive Program Amendments Date of Stockholders’ Approval

NA NA NA

5) Remuneration of Management

Identify the five (5) members of management who are not at the same time executive directors and indicate the total remuneration received during the financial year:

The following list pertains to Chief Executive Officer and the Four Most Highly Compensated Officers of the Company:

Name of Officer/Position Total Remuneration

Erramon I. Aboitiz President & Chief Executive Officer

Php131,803,054.00

Stephen G. Paradies Senior Vice President/Chief Financial Officer/ Corporate Information Officer Xavier Jose Aboitiz Senior Vice President - Chief Human Resources Officer Luis Miguel O. Aboitiz First Vice President Susan V. Valdez Senior Vice President – Chief Reputation Officer and Risk Management Officer

Source: 2014 Definitive Information Statement (SEC Form 20-IS)

E. BOARD COMMITTEES

1) Number of Members, Functions and Responsibilities

Provide details on the number of members of each committee, its functions, key responsibilities and the power/authority delegated to it by the Board:

Committee

No. of Member

s

Committee Charter Functions Key Responsibilities Power

Executive Director (E

Non-executive Direct

Independent Director

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D)

or (NED)

(ID)

Audit 0 2 3 The Board Audit Committee shall be composed of at least three (3) directors, two (2) of whom shall be independent directors and two (2) non-voting members in the persons of the Chief Financial Officer and Chief Risk Management Officer. The Chairman of the Audit Committee shall be an independent director. Each member, preferably with accounting and finance backgrounds, shall have adequate understanding, familiarity and competence at most of AEV’s financial management systems and environment.

The Audit Committee is intended to provide assistance to the Board in fulfilling their responsibility to the shareholders, potential shareholders and investment community relating to the:

1. Integrity of AEV's financial statements

2. AEV's compliance with legal/regulatory requirements

3. The independent auditor's qualifications and independence

4. The performance of AEV's internal audit function and independent auditors As part of this process, the external auditors will report to the Audit Committee, and the Group Internal Auditor will report to the Committee also from a functional perspective. In performing its duties, the Audit Committee has the authority to engage and compensate independent

The Audit Committee is intended to provide assistance to the Board in fulfilling their responsibility to the shareholders, potential shareholders and investment community relating to the: 1. Integrity of AEV's financial statements 2. AEV's compliance with legal/regulatory requirements 3. The independent auditor's qualifications and independence 4. The performance of AEV's internal audit function and independent auditors As part of this process, the external auditors will report to the Audit Committee, and the Group Internal Auditor will report to the Committee also from a functional perspective. In performing its duties, the Audit Committee has the authority to engage and compensate independent

The Committee is authorized by the Company to deal with any activity within its Charter. It is authorized to seek any information it requires from any employee or members of the Company’s Management in discharging its duties. The Committee is authorized by the Company to obtain outside legal or other independent professional advice and to secure the attendance of outsider experts with relevant experience and expertise as it deems necessary in the performance of its duties. The Committee may evaluate and update this Charter as it deems appropriate but only doing so with the sanction of the full Company.

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counsels and other advisors, which the Committee determines are necessary to carry out its duties, subject to Board approval. The Committee is required to ensure that corporate accounting and reporting practices of the Company are in accordance with all legal requirements and are of the highest quality. Each committee member must exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances.

counsels and other advisors, which the Committee determines are necessary to carry out its duties, subject to Board approval. The Committee is required to ensure that corporate accounting and reporting practices of the Company are in accordance with all legal requirements and are of the highest quality. Each committee member must exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances.

Corporate Governance (assumed the functions of the Nomination and Remuneration Committees)

0 2 3 The Board believes that it can usefully supplement its ability to make decisions related to governance principles and guidelines effectively and in a timely manner if it can delegate the task of preparing a strategic agenda for the Board and ensuring that the Board is given the information necessary for making good governance decisions. The Corporate Governance Committee is intended to assist the Board and not to pre-empt any board responsibilities in making the final

The Committee has five main broad responsibilities: 1. Develop and recommend to the Board a set of corporate governance principles, including independence standards and otherwise taking a leadership role in shaping the corporate governance of the Group.

2. Assist the Board by developing and recommending for approval a

The Committee has five main broad responsibilities: Develop and recommend to the Board a set of corporate governance principles, including independence standards and otherwise taking a leadership role in shaping the corporate governance of the Group. 2. Assist the Board by developing and recommending for approval a

In performing its duties, the Committee shall have the authority to retain at the expense of the Group such outside counsel, experts and other advisors as it determines appropriate to assist it in the full performance of its functions, subject to Board approval of such appointment. The Committee is required to contribute to the management of the Group’s affairs to ensure good governance, as

59

decisions on corporate governance, nomination and compensation matters. In performing its duties, the Committee will maintain effective working relationships with the Board and the Group senior leadership. To perform his or her role effectively, each Committee member will obtain an understanding of the detailed responsibilities of Committee membership as well as the Group’s business and operating environment.

set of governance guidelines applicable to the selection, contribution and conduct of Board members; and based on the approved guidelines to conduct periodic evaluations of the performance of Board members against the approved criteria.

3. Assist the Board by developing for approval criteria for the identification and selection of independent non-executive Directors and executive senior management directors, and by making specific recommendation to the Board on the director or directors to be nominated for election at the next annual meeting of shareholders.

4. Assist the Board by ensuring that appropriate senior leadership succession planning is in place throughout the Group and recommending to the Board appropriate potential and actual successors to the Group CEO and other key senior

set of governance guidelines applicable to the selection, contribution and conduct of Board members; and based on the approved guidelines to conduct periodic evaluations of the performance of Board members against the approved criteria. 3. Assist the Board by developing for approval criteria for the identification and selection of independent non-executive Directors and executive senior management directors, and by making specific recommendation to the Board on the director or directors to be nominated for election at the next annual meeting of shareholders. 4. Assist the Board by ensuring that appropriate senior leadership succession planning is in place throughout the Group and recommending to the Board appropriate potential and actual successors to the Group CEO and other key senior

outlined here, and in doing so to act honestly and in good faith with a view to the best interest of the stakeholders.

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leadership roles. 5. Assist the Board by considering and recommending goals and objectives relevant to Board Director and senior leadership compensation, and making recommendations for compensation structures and levels for

6. Board Directors, the Group CEOs and other senior leaders.

leadership roles. 5. Assist the Board by considering and recommending goals and objectives relevant to Board Director and senior leadership compensation, and making recommendations for compensation structures and levels for

6. Board Directors, the Group CEOs and other senior leaders.

Risk and Reputation Management

1 3 1 The Board believes that it can usefully supplement its ability to make decisions related to risk management effectively and in a timely manner if it can delegate to a Risk Committee the task of preparing an appropriate strategic agenda for the Board and ensuring that the Board is given the information necessary for making good risk management decisions. The purpose of the Risk and Reputation Management Committee is to assist the Board, and to some extent the Audit Committee of the Board, in the following: 1. Exercise of oversight responsibilities with regard to: a. Risk Management

The Risk Committee represents the Board in discharging its responsibility relating to risk management related matters across the Group. Risk Management a. Governance - Approve principles, policies, strategies and structures to guide and support the RM process and implementation across the Group b. Process and Integration - Review the methodology, tools and processes for identifying, assessing, treating, monitoring and

The Risk Committee represents the Board in discharging its responsibility relating to risk management related matters across the Group. Risk Management a. Governance - Approve principles, policies, strategies and structures to guide and support the RM process and implementation across the Group b. Process and Integration - Review the methodology, tools and processes for identifying, assessing, treating, monitoring and

The Committee does not have decision-making authority, except in the circumstances described herein or to the extent that such authority is expressly delegated by the Board.

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Risk Appetite and Tolerance of the Group Risk Profile of the Group and its performance against the Defined Risk Appetite and Tolerance Risk Management Framework Governance Structure to support its Framework

b. Reputation Management

Reputation Issues Management Corporate Branding & Communication Strategy Governance structure to support its framework

2. Establish and maintain a constructive, collaborative relationship, with the Group’s senior leadership, especially, the Group CEO, the Group Chief Risk Management Officer and the heads of each of the businesses within the Group. 3. Assist the Board, and to some extent the Board Audit Committee, in fulfilling its corporate governance responsibilities relating to risk management and reputation management.

reporting risks. These include:

Reviewing with management, on an annual basis, the established risk appetite and risk tolerance, Identification, assessment and treatment of key risks at Strategic, Project and Operational levels Monitoring and follow-up the significant risks identified, including emerging risk issues and trends Reviewing key strategies and results of the development, testing and audits of Business Continuity Plans (Emergency Response, Incident & Crisis Management and Business Recovery Reviewing the integration and alignment of the Risk Managemen

reporting risks. These include:

Reviewing with management, on an annual basis, the established risk appetite and risk tolerance, Identification, assessment and treatment of key risks at Strategic, Project and Operational levels Monitoring and follow-up the significant risks identified, including emerging risk issues and trends Reviewing key strategies and results of the development, testing and audits of Business Continuity Plans (Emergency Response, Incident & Crisis Management and Business Recovery Reviewing the integration and alignment of the Risk Managemen

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4. Assist the Board and not to pre-empt any Board responsibilities in making decisions related to risk management and reputation management. As appropriate, make recommendations to the Board for policy adoption.

t framework, concepts and process with key internal and external processes and management systems

c. Risk Finance

Reviewing the framework and process for achieving the optimal balance between retaining and transferring risks. This includes the structures for the Risk Finance activities and the processes of Risk Finance with regards to Procurement and renewal of insurance lines Claims management Risk engineering surveys. Captives management

d. Capability Building - Review of the plan and performance of the Capability Building programs developed to raise awareness

t framework, concepts and process with key internal and external processes and management systems

c. Risk Finance

Reviewing the framework and process for achieving the optimal balance between retaining and transferring risks. This includes the structures for the Risk Finance activities and the processes of Risk Finance with regards to Procurement and renewal of insurance lines Claims management Risk engineering surveys. Captives management

d. Capability Building - Review of the plan and performance of the Capability Building programs developed to raise awareness

63

and enhance the Group’s understanding and appreciation of risk management Risk Reporting

Review the Group’s risk management policy, at least on an annual basis. Provide a forum to review exposures and strategies to mitigate risks with relevant Group senior leaders and business managers. Undertake a periodic review of the delegated authorization and control levels. Upon consultation with the Group CEO and Group CFO, to make recommendations to the Board related to any changes in these levels seen to be appropriate. As and when appropriate, recommend to the Board seeking expert

and enhance the Group’s understanding and appreciation of risk management Risk Reporting

Review the Group’s risk management policy, at least on an annual basis. Provide a forum to review exposures and strategies to mitigate risks with relevant Group senior leaders and business managers. Undertake a periodic review of the delegated authorization and control levels. Upon consultation with the Group CEO and Group CFO, to make recommendations to the Board related to any changes in these levels seen to be appropriate. As and when appropriate, recommend to the Board seeking expert

64

advice from external providers for specific needs for which internal expertise is unavailable, or for which an independent perspective is considered valuable. Review reports and significant findings of Internal Audit with respect to risk management activities, together with management's responses and follow-up reports Review significant reports from regulatory and government agencies relating to risk management and compliance issues, and management's responses, if any Ensure that risk reports (risk management plan, risk maps, etc.) are updated to reflect audit reports

advice from external providers for specific needs for which internal expertise is unavailable, or for which an independent perspective is considered valuable. Review reports and significant findings of Internal Audit with respect to risk management activities, together with management's responses and follow-up reports Review significant reports from regulatory and government agencies relating to risk management and compliance issues, and management's responses, if any Ensure that risk reports (risk management plan, risk maps, etc.) are updated to reflect audit reports

65

and findings above, including any additional risk information and mitigation Escalate to the Board Audit Committee, for discussion at a joint session of the Audit and Risk Committees, any items that have a significant financial statement impact or require significant financial statement/regulatory disclosures; and escalate other significant issues, including, but not limited to, significant compliance issues, as soon as deemed necessary by the Committee in a joint session of the Audit and Risk Committees. Review the appointment, performance and replacement

and findings above, including any additional risk information and mitigation Escalate to the Board Audit Committee, for discussion at a joint session of the Audit and Risk Committees, any items that have a significant financial statement impact or require significant financial statement/regulatory disclosures; and escalate other significant issues, including, but not limited to, significant compliance issues, as soon as deemed necessary by the Committee in a joint session of the Audit and Risk Committees. Review the appointment, performance and replacement

66

of the Chief Risk Management Officer

Reputation Management

Ensure proper reputation management framework implementation across the group Issues Identification Issues Evaluation (Analysis & Action) Issues Monitoring Review Reputation Survey with management on an annual basis Review of Corporate Brand & Communication Strategy Review exposures and strategies to mitigate Reputation risks Review Social Media Strategy & Corporate Policy Review group CSR Strategy & Programs

of the Chief Risk Management Officer

Reputation Management

Ensure proper reputation management framework implementation across the group Issues Identification Issues Evaluation (Analysis & Action) Issues Monitoring Review Reputation Survey with management on an annual basis Review of Corporate Brand & Communication Strategy Review exposures and strategies to mitigate Reputation risks Review Social Media Strategy & Corporate Policy

Review group CSR Strategy & Programs

2) Committee Members

(a) Executive Committee

The Company does not have an Executive Board Committee. Instead, the Company has a Corporate

67

Center Management Committee composed of the Chief Executive Officer, Chief Human Resources Officer, Chief Risk Management Officer, and all function heads of the Company. It meets and discusses policies and directions for management actions.

(b) Audit Committee

Office Name Date of Appointment No. of

Meetings Held*

No. of Meetin

gs Attend

ed

%

Length of Service in

the Committee

Chairman (ID) Jose C. Vitug May 19, 2014 7 7 100 2008-2014 Member (ID) Raphael P.M. Lotilla May 19, 2014 7 7 100 2012-2014 Member (ID) Stephen T. CuUnjieng May 19, 2014 7 7 100 2011-2014 Member (NED) Roberto E. Aboitiz May 19, 2014 7 7 100 2007-2014 Member (NED) Justo A. Ortiz May 19, 2014 7 7 100 2006-2014

* For the period January – December 2014 Disclose the profile or qualifications of the Audit Committee members. (1) Jose C. Vitug (Independent Director, Chairman – Board Audit Committee, Member – Board Corporate

Governance Committee), 79 years old, Filipino, has served as Independent Director of AEV since 2005 and has been a member of the Board Audit Committee of AEV since 2008. He is a Senior Professor at the Philippine Judicial Academy and Consultant of the Committee on Revision of the Rules of the Supreme Court of the Philippines; Chairman of the Angeles University Foundation Medical Center; Independent Director of ABS-CBN Holdings Corporation; Trustee of the Mission Communications Foundation, Inc.; Dean of the Angeles University Foundation School of Law and a Graduate Professor of the Graduate School of Law of San Beda College. He was formerly an Associate Justice of the Supreme Court, Chairman of the House of Representatives Electoral Tribunal and Senior Member of the Senate Electoral Tribunal.

(2) Raphael P.M. Lotilla (Independent Director, Member – Board Audit Committee – Board Corporate

Governance Committee), 55 years old, Filipino, has served as Independent Director of AEV since May 2012 and has been a member of the Board Audit Committee of AEV since 2012. He was the Executive Director of the Partnerships in Environmental Management for the Seas of East Asia, an inter-governmental regional organization. Mr. Lotilla also served the Philippine government in various capacities as DOE Secretary from March 2005 to July 2007, President and Chief Executive Officer of PSALM from January 2004 to March 2005, and Deputy Director-General of National Economic and Development Authority from 1996 to 2004. Mr. Lotilla earned his degrees in Bachelor of Science in Psychology and Bachelor of Arts in History from the University of the Philippines, Diliman and finished his Bachelor of Laws from the same school. He holds a Master of Laws degree from the University of Michigan Law School, Ann Arbor, Michigan, U.S.A.

(3) Stephen T. CuUnjieng (Independent Director, Member – Board Audit Committee, Member – Board

Corporate Governance Committee – Board Risk and Reputation Management Committee), 55 years old, Filipino, has served as Independent Director of AEV since 2010 and has been a member of the Board Audit Committee of AEV since 2011. He has a long and extensive experience in investment banking with a number of major international investment banks. He has led several high profile transactions in the Philippines and Asia and has won nine Deals of the Year awards since 2005. He is currently Chairman for Asia of Evercore Partners, an investment bank listed with the New York Stock Exchange; and Adviser to the Board of SM Investments Corporation. He previously held Vice Chairman, Managing Director and Director positions with Macquarie, Merrill Lynch and Salomon Brothers, among others. He graduated from Ateneo de Manila University and also has a Ll.B (with honors) from Ateneo School of Law. He has a MBA from the Wharton School of the University of Pennsylvania, U.S.A.

(4) Roberto E. Aboitiz (Director, Member – Board Audit Committee, Member – Board Corporate Governance

Committee), 64 years old, Filipino, has served as Director of AEV since 1994. He served as Chairman of AEV from 2005 until December 2008 and has been a member of the Board Audit Committee of AEV since 2006. He is Chairman of the Board of Directors of CIPDI and CIPSI; Vice Chairman of ACO; Director

68

of THI, AboitizLand, Cotabato Light and Davao Light; Trustee of Aboitiz Foundation; Chairman and President of RAFI and West Cebu People Solutions, Inc. He is Co-Chairman of the Metro Cebu Development and Coordinating Board. He was a Director of CitySavings from 1992 up to March 2013. He graduated from Ateneo de Manila University with a Bachelor of Arts degree in Behavioral Science. In 2008, he received the Doctor of Humanities (Honoris Causa) and the Perlas Award for Valuable Leader in Youth and Community Development. He was also conferred the Doctor of Science in Business Management (Honoris Causa).

(5) Justo A. Ortiz (Director, Member – Board Audit Committee, Member – Board Risk and Reputation

Management Committee), 56 years old, Filipino, has served as Director of AEV since 1994 and has been a member of the Board Audit Committee since 2006. He is also Chairman and Chief Executive Officer of UnionBank, Vice Chairman of MegaLink, Director of Bankers Association of the Philippines, Member of Philippine Trade Foundation, Inc. and World Presidents Organization. Prior to his stint in UnionBank, he was Managing Partner for Global Finance and Country Executive for Investment Banking at Citibank N.A. He graduated magna cum laude with a degree in Economics from Ateneo de Manila University.

Source: 2013 Information Statement (SEC 20-IS) Describe the Audit Committee’s responsibility relative to the external auditor.

Based on the Manual of Corporate Governance, the Audit Committee has the following responsibilities to the external auditor:

(1) Review and approve the hiring policies regarding partners, employees and former partners and employees of the Group’s external auditors, and make appropriate recommendations to the Board.

(2) Select, monitor and review the independence, performance and effectiveness, and

remuneration of external auditors, in consultation with the Group CEO, the Group CFO and the Group internal auditor, and where appropriate recommend to the Board replacing the current external auditor with another, after having conducted a rigorous search.

(3) Ensure that external auditors are ultimately accountable to the Board and to the

shareholders of the Group.

(4) Meet with external auditors and the Group CFO to review the scope of the proposed audit for the current year and the audit procedures to be utilized. At the conclusion of the audit, receive the external auditor’s report, reviewing and discussing their comments and recommendations, in consultation with the Group CEO and the Group CFO, and make specific recommendations to the Board for adoption.

(5) Consider whether the external auditor’s performance of specific nonaudit services is

compatible with the auditor’s independence, and if so, determine the specific policies and processes to be adopted as part of the external auditor’s appointment to ensure that independence is maintained.

(6) Provide an open avenue of communication where necessary between Group senior

leadership, the Group internal auditor, the Board and the external auditor.

(7) Review the external auditor’s management comment letter and management’s responses thereto, and enquire as to any disagreements/restrictions between management and external auditor. Review any unadjusted differences brought to the attention of management by the external auditors and the resolution of the same.

(8) Review and discuss with the Group CEO, the Group CFO and the external auditors the

accounting policies which may be viewed as critical, and review and discuss any significant changes to the accounting policies of the Group and accounting and financial reporting proposals that may have significant impact on the Group’s financial reports.

In addition, the Audit Committee Charter provides for the following additional responsibilities with

69

respect to the External Auditor:

1. Appoint, determine the compensation of, and review the scope of work, fees and performance of, including re-appointment and resignation, of the independent auditors of the Company. The independent auditors of the Company shall report directly to the Committee and the Committee has the ultimate authority and responsibility to select, evaluate and, where appropriate, re-appoint or replace the independent auditors. The independent auditors shall report to the Committee, and the Committee shall oversee the resolution of, disagreements between management and the independent auditors in the event that they arise. At least annually, the Committee shall evaluate the independent auditors’ professional qualifications, performance, independence and compensation. The evaluation shall include a review of the qualifications, performance and independence of the lead partner of the independent auditors. In conducting the review, the Committee shall take into account the Auditor’s Report stated in the succeeding section and the independent auditors’ work throughout the year, as well as the opinions of management and internal auditors. The Committee shall present its conclusions with respect to the independent auditors to the Company. 2. Ensure that independent auditors comply with the International on the Professional Practice of Internal Auditing (ISPPIA). 3. Ensure that the independent auditors shall not at the same time provide the services of an internal auditor to the same client. The Committee shall ensure that other non-audit work shall not be in conflict with the functions of the independent auditor. 4. Ensure that the independent auditors are ultimately accountable to the Board of Directors and shareholders of the Company. At least annually, obtain and review the completeness and timeliness of the report from the independent auditors (the “Auditor’s Report”) describing the Company’s internal quality control procedures, any material issue raised by the most recent internal quality control review or peer review of the Company or by any inquiry or investigation by governmental or regulatory authorities within the preceding five (5) years, and the recommended steps to be taken to deal with such issues. The Committee shall review and discuss the Auditor’s Report with the independent auditors and management, and make specific recommendations to the Board of Directors for adoption.

(c) Nomination Committee (functions incorporated into the Board Corporate Governance Committee)

In February 2009, the Board of Directors of AEV approved the creation of additional board committees and the consolidation of existing ones. In the same year, the Investor Relations Committee was dissolved and the Board Nominations and Compensation Committee merged with the Board Corporate Governance Committee.

Office Name Date of Appointment

No. of Meetings

Held*


%


the Committee

Chairman (NED)

Jon Ramon Aboitiz May 19, 2014 4 4 100 2010-2014

Member (NED) Roberto E. Aboitiz May 19, 2014 4 3 75 2010-2014 Member (ID) Jose C. Vitug May 19, 2014 4 4 100 2010-2014 Member (ID) Raphael P.M.

Lotilla May 19, 2014 4 4 100 2012-2014

Member (ID) Stephen T. CuUnjieng

May 19, 2014 4 3 75 2011-2014

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Ex-officio M. Jasmine S. Oporto

May 19, 2014 4 2 50 2010-2014

Ex-officio Xavier Jose Aboitiz May 19, 2014 4 3 75 2010-2014

* For the period January- December 2014

(d) Remuneration Committee (functions incorporated into the Board Corporate Governance Committee) In February 2009, the Board of Directors of AEV approved the creation of additional board committees and the consolidation of existing ones. In the same year, the Investor Relations Committee was dissolved and the Board Nominations and Compensation Committee merged with the Board Corporate Governance Committee.


No. of Meetings

Held*


%


the Committee

Chairman (NED)

Jon Ramon Aboitiz May 19, 2014 4 4 100 2010-2014

Member (NED) Roberto E. Aboitiz May 19, 2014 4 3 75 2010-2014 Member (ID) Jose C. Vitug May 19, 2014 4 4 100 2010-2014 Member (ID) Stephen T. CuUnjieng May 19, 2014 4 4 100 2012-2014 Member (ID) Raphael P.M. Lotilla May 19, 2014 4 3 75 2011-2014 Ex-officio M. Jasmine S. Oporto May 19, 2014 4 2 50 2010-2014 Ex-officio Xavier Jose Aboitiz May 19, 2014 4 3 75 2010-2014

* For the period January- December 2014

(e) Others (Specify)

Provide the same information on all other committees constituted by the Board of Directors: BOARD RISK AND REPUTATION MANAGEMENT COMMITTEE


No. of Meetings

Held*


% Length of

Service in the Committee

Chairman (NED)

Enrique M. Aboitiz, Jr. May 19, 2014 5 5 100 2009-2014

Member (NED) Justo A. Ortiz May 19, 2014 5 4 80 2009-2014 Member (NED) Jon Ramon Aboitiz May 19, 2014 5 5 100 2010-2014 Member (ID) Stephen T. CuUnjieng May 19, 2014 5 5 100 2010-2014 Member (ED) Erramon I. Aboitiz May 19, 2014 5 5 100 2014-2015 Ex-officio Stephen G. Paradies May 19, 2014 5 5 100 2009-2014 Ex-officio Susan V. Valdez May 19, 2014 5 5 100 2012-2014

� ��

3) Changes in Committee Members

Indicate any changes in committee membership that occurred during the year and the reason for the changes:

Name of Committee Name Reason

Audit No change in membership. Nomination No change in membership. Remuneration No change in membership. Corporate Governance No change in membership. Risk and Reputation Erramon I. Aboitiz Increase in membership.

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Management Committee

4) Work Done and Issues Addressed

Describe the work done by each committee and the significant issues addressed during the year.

Name of Committee Work Done Issues Addressed

Audit A. March 4, 2014

1. SGV Presentation of Audit Results for Financial Year 2013

2. AEV YTD 2013 Financials 3. Presentation of Group Internal Audit a. Overall Opinion 2013 b. Statement of Independence c. Audit Highlights d. Audit Master Plan for 2014 e. 2014 Audit Plans & Deliverables 3. Board Audit Committee Self-Assessment for 2013

B. May 6, 2014 1. AEV YTD March Financials 2. Presentation of Group Internal Audit a. Audit Highlights b. Organizational Update

C. June 2, 2014 (joint with Risk and Reputation Committee)

1. Risk Management Plan Validation Audit Results 2. AEV and AP Top Risks

D. July 22, 2014 1. Appointment of External Auditor for 2014 2. AEV YTD June 2014 Financials 3. Presentation of Group Internal Audit a. Audit Highlights of Completed Engagements b. Audit Master Plan for SecondSem 2014

E. July 30, 2014 1. Approval of June Financials for Disclosure

F. October 28, 2014

1. YTD September 2014 Financials 2. Presentation of Group Internal Audit

a. Audit Highlights of Completed Engagements b. Master plan for 2015 c. Review of Audit Charters

G. December 11, 2014

1. Highlights of the Audit Results of the 2014 ERM Process Review

2. 2014 AEV and AP Top Risks - Risk Management Plan Validation Audit Results

All issues passed upon by the Committee in these matters were discussed and addressed.

Nomination (Incorporated into the Corporate Governance Committee)

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Remuneration (Incorporated into the Corporate Governance Committee)

Corporate Governance (assumes the functions of the Nomination and Remuneration Committees)

A. February 27, 2014 1. Nominations for Members of the Board of Directors 2. Preparation of Information Statement and 2013

Corporate Governance Report 3. Proposed Agenda for the 2014 Annual Shareholders’

Meeting 4. 2013 Statutory Compliance Report 5. Regulatory Updates 6. Transfer Pricing Updates 7. Organization of New Tax Team 8. Investor Relations

B. May 22, 2014 1. Updates on Corporate Governance Scorecards 2. Regulatory Updates 3. CEO and Board Assessment Forms 4. Updates on 2014 ASM Preparations 5. 2014 Dividend Distribution 6. Investor Relations

C. August 27, 2014

1. Updates on Corporate Governance Scorecards and Practices

2. Regulatory Updates 3. Board Assessment 4. Investor Relations

D. December 5, 2014

1. Corporate Governance Updates 2. Review of any SEC/PSE Violations or Request for

Clarification 3. Regulatory Updates 4. SEC Issuances 5. PSE Matter: Memorandum on Issuance of TRO on RR

1-2014 6. BIR Issuances 7. Investor Relations Report


Risk and Reputation Management

A. February 27, 2014 1. 2014 Plans – Risk Management and Reputation

Management 2. 2014 Strategic Risks 3. Risk Finance Updates

B. June 2, 2014 1. Strategic Business Units Top Risks Presentation 2. Presentation – Aboitiz Foundation,

WeatherPhilippines Foundation 3. Risk Finance Updates

C. June 2, 2014 (joint with Audit Committee)

1. Risk Management Plan Validation Audit Results 2. AEV and AP Top Risks


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D. August 27, 2014 1. Risk Maturity Index Assessment - Board Items 2. Risk Finance Updates

E. December 11, 2014 1. 2015 Aboitiz Group Top Risks 2. Review of P2B and above insurance covers 3. 2014 Risk and Reputation Management Year-end

Report 4. 2015 Risk and Reputation Management Plans,

Initiatives, Programs 5. Risk and Reputation Management Policy Review and

Approval F. December 11, 2014 (Joint with Audit Committee)

1. Highlights of the Audit Results of the 2014 ERM Process Review

2. 2014 AEV and AP Top Risks - Risk Management Plan Validation Audit Results

5) Committee Program

Provide a list of programs that each committee plans to undertake to address relevant issues in the improvement or enforcement of effective governance for the coming year.

Name of Committee Planned Programs Issues to be Addressed Executive Not applicable Audit Approved the inclusion in the audit

master plan for next year governance audits which includes the risk management process audit and validation of the risk treatment plans committed by the different business units.

Adequacy and effectiveness of the risk management processes within the organization.

Nomination Now Corporate Governance Committee

Remuneration Now Corporate Governance Committee

Corporate Governance Institute the use of electronic media and information and communication technologies (ICT) [E-Learning] in making all employees and officers of the Company knowledgeable on good corporate governance practices.

Adopt, disseminate and implement best practices in corporate governance within the Aboitiz Group.

Risk and Reputation Management Committee

Achieve AON’s risk maturity level 4 Groupwide.

Ensuring risk management policies and practices are consistently implemented across the Group.

F. RISK MANAGEMENT SYSTEM 1) Disclose the following:

(a) Overall risk management philosophy of the company;

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The Aboitiz Group commits to protect its reputation, safeguard its core investments, empower team members, delight customers and engage communities and to create long-term value for all its stakeholders. AEV and the Business Units (BUs) commit to:

1. Establish Risk Management Governance policies and structures that guides and supports the RM process across the group.

2. Develop and implement the methodology, tools and Processes for assessing, treating, monitoring and reporting risks including the Integration with Strategy and key internal and external processes.

3. Ensure the process for achieving the optimal balance between retaining and transferring risks thru Risk Finance.

4. Build a Risk Management culture through Capability Building programs to raise awareness and enhance the Group’s understanding and appreciation of risk management.

While it is the Team Leader’s accountability to manage business risks, each Team Member has a role to play in building the Aboitiz Group as the best risk-managed business group in the region.

(b) Is there a statement in the Annual Report or in other company reports that the directors have reviewed the

effectiveness of the risk management system with comments on the adequacy thereof;

1. Risk Maturity (RM) Index Assessment- The Risk and Reputation Management Report in the 2013 Annual Report states that AEV and its business units (BUs) continued to assess the state of the group’s risk management (RM) maturity and how it compares against leading practices of similar organizations in the region and globally through the Aon’s Risk Maturity Index (RMI). Participants of the RM maturity assessment included members of the board as well as key executives and team leaders.

2. Joint Meeting – Board Risk and Reputation and Board Audit Committee – In the 2013 joint meeting between the Risk and Reputation Management and Audit Committees, the alignment of the vulnerability scoring for Internal Audit and Risk Management was agreed. Initial results of the Risk Management Plan Validation audits which were aimed to check the existence of Risk Treatment activities were also presented.

3. Board Risk and Reputation Management Committee – In 2014, quarterly committee

meetings were held to assist the Board of Directors in handling board responsibilities on oversight of the Risk Management program, ensuring proper RM framework implementation, review, monitor and follow-up the significant risks identified, including emerging risk issues and trends and mitigation measures and review risks with management on an annual basis.

(c) Period covered by the review;

1. Risk Maturity Index Assessment- 2014 2. Joint Meeting – Board Risk and Reputation and Board Audit Committee - 2014 3. Board Risk and Reputation Management Committee – 2014

(d) How often the risk management system is reviewed and the directors’ criteria for assessing its

effectiveness; and

1. Annual Risk Maturity Index Assessment 2. Joint Meeting – Board Risk and Reputation and Board Audit Committee – One joint meeting

in 2014 3. Board Risk and Reputation Management Committee – Quarterly Meetings in 2014

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(e) Where no review was conducted during the year, an explanation why not.

Not applicable. 2) Risk Policy

(a) Company Give a general description of the company’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

1. Purpose This Policy sets out the risk management objectives and requirements of the Aboitiz Group and its Business Units. The Policy aims to structure and formalize the risk management activities across the business units of the Aboitiz Group. The Policy is intended to:

a. Provide a framework for identifying, analyzing, evaluating, treating, monitoring and communicating risks;

b. Communicate the roles and accountabilities of all stakeholders in the risk management

process;

c. Highlight the status of risks to which the Aboitiz Group and its Business Units are exposed to.

The Aboitiz Group’s Risk Management Policy is adopted mostly from and consistent with International Standard ISO 31000 (Risk Management – Principles and Guidelines)

2. Scope The policy covers all Aboitiz Group Business Units and Corporate Center Units.

3. General Provisions

a. Conduct a formal risk assessment on an annual basis, and as necessary. b. Report annually on the key business unit risks following AEV RMT risk reporting formats; c. Develop and review, at least annually, a statement on the risk appetite and risk tolerance of

the Group and Business Unit; d. Continuously monitor key risks and controls and implement appropriate risk responses

where necessary; e. Identification of a full time Risk Manager per Business Unit f. Inclusion of Risk Management in regular SBU/BU Mancom, Key Support Group (e.g. AP

Regulatory, AP Business Development, etc.) discussions

4. Risk Classification System The Group classifies its risks into four (4) namely, Strategic, Operational, Financial and Legal/Compliance. The Risk Classification system was established to:

a. enable the organization to identify where similar risks exist within the organization b. enable the organization to identify who should be responsible in the management of

related or similar risks c. allow the Group to benchmark RM practices with other organizations globally, region and

industry in accordance with international risk management standards,

(b) Group

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Give a general description of the Group’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

1. The Aboitiz Group maintains one risk management policy for AEV and AboitizPower as well as for the Group. All of our Business Units are now in the process of developing their respective RM Policy based on the Group RM Policy.

2. Purpose

The RM Policy sets out the risk management objectives and requirements of the Aboitiz Group and its Business Units. The Policy aims to structure and formalize the risk management activities across the business units of the Aboitiz Group. The Policy is intended to:

a. Provide a framework for identifying, analyzing, evaluating, treating, monitoring and communicating risks;

b. Communicate the roles and accountabilities of all stakeholders in the risk management process;

c. Highlight the status of risks to which the Aboitiz Group and its Business Units are exposed to.

The Aboitiz Group’s Risk Management Policy is adopted mostly from and consistent with International Standard ISO 31000 (Risk Management – Principles and Guidelines).

3. Scope The policy covers all Aboitiz Group Business Units and Corporate Center Units.

4. General Provisions a. Conduct a formal risk assessment on an annual basis, and as necessary. b. Report annually on the key business unit risks following AEV RMT risk reporting formats; c. Develop and review, at least annually, a statement on the risk appetite and risk tolerance of the

Group and Business Unit; d. Continuously monitor key risks and controls and implement appropriate risk responses where

necessary; e. Identification of a full time Risk Manager per Business Unit f. Inclusion of Risk Management in regular SBU/BU Mancom, Key Support Group (e.g. AP

Regulatory, AP Business Development, etc.) discussions

5. Risk Classification System The Group classifies its risks into four (4) namely, Strategic, Operational, Financial and Legal and Compliance. The Risk Classification system was established to:

a. enable the organization to identify where similar risks exist within the organization b. enable the organization to identify who should be responsible management of related or

similar risks c. allow the Group to benchmark RM practices with other organizations globally, region and

industry in accordance with international risk management standards,

(c) Minority Shareholders

Indicate the principal risk of the exercise of controlling shareholders’ voting power.

Risk to Minority Shareholders Takeover maneuvers or similar devices that may entrench management or the existing controlling or minority shareholder groups. The Company, however, is committed to equitable and fair

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treatment of minority shareholders and has clear and enforceable policies with respect to the treatment of minority shareholders to avoid shareholder opportunism The Company provides all shareholders with accurate and timely information regarding the number of shares of all classes held by controlling shareholders and their affiliates.

3) Control System Set Up

(a) Company

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the company:

Risks of AEV, as parent company of the Aboitiz Group cover not only risks affecting AEV as a company but key risks affecting its Business Units as well.

Risk Exposure Risk Assessment (Monitoring and Measurement Process)

Risk Management and Control (Structures, Procedures, Actions Taken)

Reputation Risk Today’s world of higher corporate governance standards coupled with the rise of civil society groups, social media, and greater scrutiny from key stakeholders, have created a new environment where our corporate reputation has become a differentiating asset as well as our No. 1 risk.

1. Building the organization’s capability through a formalized governance structure and an intelligence process

2. Implementing anticipatory issues management.

3. Development and implementation of a groupwide social media policy and strategy.

4. Development of brand champions and brand advocates through effective corporate communication and branding programs.

5. Ensuring brand integrity by establishing reputation metrics, aiming to close the gap between how we project ourselves and how others perceive the Company.

6. Integrating sustainable practices across the value chain and ensuring that long-term decisions balance the interest of people, planet and profit.

Competition Risk As with other businesses, AEV and its subsidiaries and affiliates operate in highly competitive environments. As such, failure to properly consider changes in our respective markets and predict the actions of competitors can greatly diminish our competitive advantage.

1. Separate business development organizations for power and non-power businesses;

2. Implement a more robust and comprehensive strategic planning process; and

3. Integrate Enterprise Risk Management into the strategic planning process.

Regulatory Risk The complexity of the business and regulatory landscape is increasing dramatically. Several of AEV’s Business Units particularly in the power and banking sectors are

1. Dedicated regulatory team for our Power Group;

2. Our banking units have full time compliance officers who spearhead the implementation

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now being subject to more stringent regulations.

of compliance programs; 3. Maintain good working relations

with the Department of Energy, Bangko Sentral ng Pilipinas, Energy Regulatory Commission, Department of Environment and Natural Resources, Board of Investments, Food and Drug Administration, Securities and Exchange Commission, Department of Trade and Industry, Philippine Stock Exchange, and other key regulatory agencies;

4. Participate actively in consultative processes that lead to the development of rules and regulatory policy.

Business Interruption Due To Natural Calamities And Critical Equipment Breakdown

The loss of critical functions and equipment caused by natural calamities such as earthquakes, typhoons and floods could result to significant business interruptions. Interruptions may also be caused by other factors such as major equipment failures, fires and explosions, hazardous waste spills, workplace fatalities, product tampering, terrorism, and other serious risks.

1. Perform regular preventive maintenance of all our facilities;

2. Continually evaluate and strengthen loss prevention controls;

3. Develop business continuity plans per site; and

4. Procure Business Interruption insurance to cover the potential loss in profits in the event of a major damage to the Group’s critical facilities and assets.

Commodity Risk Our food and power businesses have raw material and fuel requirements that are subject to price, freight and foreign exchange volatility factors. A fluctuation in any of these volatile elements, individually or combined, will result to increases in the operating costs of these companies.

1. Better understanding of the commodity markets;

2. Enter into contracts and hedge positions with the different suppliers of these commodities;

3. Develop a Commodity Risk Management framework to help improve existing capabilities in managing and reducing uncertainty relating to these commodities.

Project Risk AEV is looking at major investment opportunities in the power generation, power distribution, infrastructure, renewable fuels, and real estate sectors. Given the variance in the scale and complexity of these projects, there are inherent risks and issues, such as project completion and execution within budget and timelines.

1. Partner with contractors and suppliers of established good reputation;

2. Implement Project Risk Management following the PMBOK (Project Management Book of Knowledge) framework;

3. Regular review of the project risk register to monitor implementation of risk control measures.

(b) Group

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Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the Group:

The Aboitiz Group covers risks affecting AEV as a company as well as key risks affecting its Business Units. Each of the Business Units in the Aboitiz Group has a Risk Management Plan that covers the key strategic, operational, financial and legal/compliance risks affecting the Business Units. These risks are then consolidated at the Aboitiz Group Level to arrive at the top Group risks.

Risk Exposure Risk Assessment (Monitoring and Measurement Process)

Risk Management and Control (Structures, Procedures, Actions Taken)

Reputation Risk Today’s world of higher corporate governance standards coupled with the rise of civil society groups, social media, and greater scrutiny from key stakeholders, have created a new environment where our corporate reputation has become a differentiating asset as well as our No. 1 risk.

1. Building the organization’s capability through a formalized governance structure and an intelligence process

2. Implementing anticipatory issues management

3. Development and implementation of a groupwide social media policy and strategy

4. Development of brand champions and brand advocates through effective corporate communication and branding programs

5. Ensuring brand integrity by establishing reputation metrics, aiming to close the gap between how we project ourselves and how others perceive the Company

6. Integrating sustainable practices across the value chain and ensuring that long-term decisions balance the interest of people, planet and profit.

Competition Risk As with other businesses, AEV and

its subsidiaries and affiliates operate in highly competitive environments. As such, failure to properly consider changes in our respective markets and predict the actions of competitors can greatly diminish our competitive advantage.

1. Separate business development organizations for power and non-power businesses;

2. Implement a more robust and comprehensive strategic planning process;

3. Integrate Enterprise Risk Management into the strategic planning process.

Regulatory Risk The complexity of the business and regulatory landscape is increasing dramatically. Several of AEV’s Business Units particularly in the power and banking sectors are now being subject to more stringent regulations.

1. Dedicated regulatory team for our Power Group;

2. Our banking units have full time compliance officers who spearhead the implementation of compliance programs;

3. Maintain good working relations with the Department of Energy, Bangko Sentral ng Pilipinas, Energy Regulatory Commission,

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Department of Environment and Natural Resources, Board of Investments, Food and Drug Administrations, Securities and Exchange Commission, Department of Trade and Industry, Philippine Stock Exchange, Housing and Land Use Regulatory Board (HLURB), local government units (LGUs), and other key regulatory agencies;

4. Participate actively in consultative processes that lead to the development of rules and regulatory policy.

Business Interruption Due To Natural Calamities And Critical Equipment Breakdown

The loss of critical functions and equipment caused by natural calamities such as earthquakes, typhoons and floods could result to significant business interruptions. Interruptions may also be caused by other factors such as major equipment failures, fires and explosions, hazardous waste spills, workplace fatalities, product tampering, terrorism, and other serious risks.

1. Perform regular preventive maintenance of all our facilities;

2. Continually evaluate and strengthen loss prevention controls;

3. Develop business continuity plans per site;

4. Procure Business Interruption insurance to cover the potential loss in profits in the event of a major damage to the Group’s critical facilities and assets.

Commodity Risk Our food and power businesses have raw material and fuel requirements that are subject to price, freight and foreign exchange volatility factors. A fluctuation in any of these volatile elements, individually or combined, will result to increases in the operating costs of these companies.

1. Better understanding of the commodity markets;

2. Enter into contracts and hedge positions with the different suppliers of these commodities;

3. Develop a Commodity Risk Management framework to help improve existing capabilities in managing and reducing uncertainty relating to these commodities.

Project Risk AEV is looking at major investment opportunities in the power generation, power distribution, infrastructure, renewable fuels, and real estate sectors. Given the variance in the scale and complexity of these projects, there are inherent risks and issues, such as project completion and execution within budget and timelines.

1. Partner with contractors and suppliers of established good reputation;

2. Implement Project Risk Management following the PMBOK (Project Management Book of Knowledge) framework;

3. Regular review of the project risk register to monitor implementation of risk control measures.

(c) Committee

Identify the committee or any other body of corporate governance in charge of laying down and supervising these control mechanisms, and give details of its functions:

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Committee/Unit Control Mechanism Details of its Functions

AEV Board of Directors Oversight

Overall Responsible for Risk Management

��

Board Risk and Reputation Management Committee

Oversight (delegated by Board of Directors)

1. Oversight of the Risk Management program;

2. Ensure proper RM framework implementation;

3. Review, monitor and follow-up the significant risks identified, including emerging risk issues and trends and mitigation measures;

4. Review risks with management on a annual basis. ��

Board Audit Committee Oversight

Oversight responsibilities with regards to the:

1. integrity of the Company’s financial

reporting system; 2. adequacy and effectiveness of the

Company’s systems of internal control, governance and risk management processes;

3. performance of internal audit function;

4. qualification, independence and performance of external auditors;

5. compliance with legal and regulatory requirements; and

6. maintenance of open communication lines between management, external auditors, the internal audit department, and the Company. ��

Board Risk and Reputation Management and Audit Committee

Oversight Escalate for discussion at a joint session of the Audit and Risk and Reputation Management Committees any items that have a significant financial statement impact or require significant financial statement/regulatory disclosures; and escalate other significant issues, including, but not limited to, significant compliance issues, as soon as deemed necessary by both Committees to a joint session of the Audit and Risk and Reputation Management Committees.

��

Risk Management Council Monitor, Review 1. Composed of Aboitiz Group CEOs

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and Approval (Group Mancom); 2. Monitor Group’s top risks; 3. Reviews and approves Group-wide

Risk Management strategies, programs and initiatives. ��

Insurance Management Committee

Monitor, Review and Approval

1. Reviews and validates the insurance quotations as provided by Risk Finance Team;

2. Approves which insurance programs the Business Units will take;

3. Acts on recommendatory basis for risks with values beyond a certain level and escalates to RM Council for approval. ��

Risk Management Steering Committee

Monitor, Review and Approval

1. Composed of the Risk Managers of the Aboitiz Group BUs;

2. Discuss RM strategies, initiatives and programs for implementation to SBUs/BUs;

3. Assists the RM Council (Group Mancom) in review of items and issues before taken up at the RM Council;

4. Reviews group risks including emerging risks;

5. Communicates developments and leading practices in RM including sharing of solutions to risk management issues/problems. ��

AEV Management Committee 1. Composed of the Chief Executive Officer, Chief Financial Officer, Chief Risk and Management Officer, Chief Human Resources Officer, Chief Legal Officer, and all functional Team Leaders.

2. Meet, discuss and adopt policies for the organization to implement strategies of the Company.

G. INTERNAL AUDIT AND CONTROL 1) Internal Control System

Disclose the following information pertaining to the internal control system of the company: (a) Explain how the internal control system is defined for the company;

The system of internal controls refers to policies and procedures designed by management to (1) manage and mitigate known risks; (2) protect its assets from loss or fraud; (3) ensure reliability and

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integrity of financial information; (4) ensure compliance to laws, statutory and regulatory requirements; (5) promote efficient and effective operations; and (6) accomplish the company’s goals and objectives. Internal control is a management process for keeping an entity on course in achieving its organizational objectives. A management control system, including comprehensive internal controls, provides reasonable assurance that the company’s business goals and/or objectives are being met.

(b) Is there a statement in the Annual Report or in other reports of the company that the directors have reviewed the effectiveness of the internal control system and whether they consider them effective and adequate;

Yes. The Board Audit Committee Report to the Board of the Directors in the Annual Report (including SEC Form 20-IS) contains an assessment of the state of the Company’s internal controls.

(c) Period covered by the review;

The review is done annually.

(d) How often internal controls are reviewed and the directors’ criteria for assessing the effectiveness of the

internal control system; and

The state of internal controls is done at least annually. The company conducts an annual self-assessment on the performance of the Board Audit Committee aligned with SEC Memo Circular No. 4, series of 2012 which covers the criteria for assessing the effectiveness of the internal control system.

(e) Where no review was conducted during the year, an explanation why not.

Not applicable.

2) Internal Audit

(a) Role, Scope and Internal Audit Function

Give a general description of the role, scope of internal audit work and other details of the internal audit function.

Role Scope

Indicate whether In-house or Outsource Internal Audit Function

Name of Chief Internal Auditor/Auditing Firm

Reporting process

Ensure that effective and appropriate organizational and procedural controls are in place.

Audit Universe: AEV Group of Companies • Scope of work encompasses evaluating and improving the adequacy and effectiveness of the Company’s risk management, control and governance processes

Generally In-house. Outsourcing/Co-sourcing is done from time to time for engagements that may be highly technical in nature or may be too manual (eg. Fixed Asset Count).

Maria Lourdes Y. Tanate – AEV Group Internal Audit Head

Functionally reports to the Board Audit Committee and Administratively reports to the President & CEO • Financial performance and all Audit report highlights are presented to the Audit Committee at

84

NOTE: ��

least 4 times a year. General Flow of Audit Reporting

Exit Conference with the Business Units auditees up to Manager level

Detailed report presented to different levels of management of the BU

Executive Summary presented to the C-suite level executives

Audit Report to the Board

(b) Do the appointment and/or removal of the Internal Auditor or the accounting /auditing firm or corporation to which the internal audit function is outsourced require the approval of the audit committee?

Yes. This is covered in the Company’s Manual of Corporate Governance as well as the Board Audit Committee Charter. The independent auditors of the Company reports directly to the Audit Committee and the Committee has the ultimate authority and responsibility to select, evaluate and, where appropriate, re-appoint or replace the independent auditors. The Committee is likewise tasked to review the appointment and performance of the Internal Auditor, who shall functionally report directly to the Committee.

(c) Discuss the internal auditor’s reporting relationship with the audit committee. Does the internal auditor

have direct and unfettered access to the board of directors and the audit committee and to all records, properties and personnel?

The Head of the Group Internal Audit (GIA) functionally reports to the Board Audit Committee and administratively to the President and CEO. GIA has full, free and unrestricted access to all operating and financial company records, information, systems and applications, physical properties, activities and personnel relevant to the company and subject under review. (�� )

(d) Resignation, Re-assignment and Reasons

Disclose any resignation/s or re-assignment of the internal audit staff (including those employed by the third-party auditing firm) and the reason/s for them.

Name of Audit Staff Reason Movements from AEV Corporate Audit Team to the different SBUS FTY 2013

Limbuhan, Peter G. – From AEV GIA to AEV iCSD (I.S. Internal Audit Senior)

Internal transfer. Job promotion to IT Security Supervisor.

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(e) Progress against Plans, Issues, Findings and Examination Trends

State the internal audit’s progress against plans, significant issues, significant findings and examination trends.

Progress Against Plans On-track based on committed timelines.

Issues6

All audit issues are monitored in the ISSUES MONITORING REPORT (IMR). The IMR contains the details action plans per business unit and the corresponding timeline for each issue. This is being monitored and reported regularly to the Board Audit Committee.

Findings7

The IMR also contains the detailed findings of all audit examinations done by the GIA as well as the highlights of the results of the resident audit teams.

Examination Trends

Operations or Process-based Reviews, Compliance Reviews, Financial reviews.

1. Recurring issues are noted as it impacts on the audit score given the auditee.

2. Starting 2013, all audit scores are to be incorporated in the business unit’s Key Results Areas (KRA) for closer monitoring. This would likewise impact on their BUs performance assessment for the year.

The above monitoring activities are done on a regular basis.

(f) Audit Control Policies and Procedures

Disclose all internal audit controls, policies and procedures that have been established by the company and the result of an assessment as to whether the established controls, policies and procedures have been implemented under the column “Implementation.”

Policies & Procedures Implementation

Operating Policies & Procedures of Business Units

BUs have their respective operating policies and procedures. The updating of which is done regularly—some as a result of audit findings. The updating of policies and procedures is an action item that gets included in the Issues Monitoring Report (IMR) mentioned above with the corresponding timeline commitment by the BU.

6 “Issues” are compliance matters that arise from adopting different interpretations. 7 “Findings” are those with concrete basis under the company’s policies and rules.

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Examples of ongoing corporate initiatives to ensure that processes are properly documented includes compliance to world-class standards such as:

1. Quality Management System (QMS (ISO9001:2008)

2. Information Security Management System (ISMS) – ISO 27001

3. Occupational Health and Safety Assessment Series (OHSAS ISO 18001)

4. Environmental Management Systems (EMS ISO 14001)

5. HACCP and HALAL Certification for the Food Group

(g) Mechanism and Safeguards

State the mechanism established by the company to safeguard the independence of the auditors, financial analysts, investment banks and rating agencies (example, restrictions on trading in the company’s shares and imposition of internal approval procedures for these transactions, limitation on the non-audit services that an external auditor may provide to the company):

Auditors (Internal and External)

Financial Analysts

Investment Banks

Rating Agencies

INTERNAL AUDITORS:

1. Group Internal Audit (GIA) functionally reports to the Board Audit Committee and administratively to the President & CEO of the Company (Source: Board Audit Committee Charter 13. C Internal Control & Audit)

2. GIA is a recommendatory body.

It has no direct operational responsibility of authority over any of the activities audited. GIA will not implement internal controls, develop procedures and install systems, prepare records or engage in any other activity normally reviewed by the team, as this may impair its objectivity and judgment. The GIA Head annually confirms to the Board the organizational independence of the internal audit activity. (Source: Internal Audit Charter. Independence & Objectivity)

Information provided by Investor Relations is limited to information already publicly available. At no point is insider information given. All transactions are made on an arms-length basis and regular reports regarding the results of Investor Relations’ interaction with outside parties are provided to the Management and the Board. Quarterly briefings are conducted on a regular basis and all analysts are invited to attend without any exclusivity.

Information provided is limited to information already publicly available. At no point is insider information given. All transactions are made on an arms-length basis and regular reports regarding the results of interaction with outside parties are provided to the Management and the Board.

Information provided is limited to information already publicly available. At no point is insider information given. All transactions are made on an arms-length basis and regular reports regarding the results of interaction with outside parties are provided to the Management and the Board.

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EXTERNAL AUDITORS: 1. The Board appoints, determine

the compensation of, and review the scope of work, fees and performance of, including re-appointment and resignation, of the independent auditors of the Company.

2. Ensure that the independent auditors shall not at the same time provide the services of an internal auditor to the same client. The Committee shall ensure that other non-audit work shall not be in conflict with the functions of the independent auditor

(Source: Board Audit Committee Charter� 13� B. Independent ��ternal Auditor�)

(h) State the officers (preferably the Chairman and the CEO) who will have to attest to the company’s full compliance with the SEC Code of Corporate Governance. Such confirmation must state that all directors, officers and employees of the company have been given proper instruction on their respective duties as mandated by the Code and that internal mechanisms are in place to ensure that compliance.

The Certification on the Company’s compliance with its Manual of Corporate Governance is attested to by the Corporate Secretary and the President/ CEO of the Company.

H. ROLE OF STAKEHOLDERS

(b) Disclose the company’s policy and activities relative to the following:

Policy Activities

Customers' welfare Pursuant to the Company’s Occupational Health and Safety Policy, all business and corporate service units of the Company are required to comply with all legislative occupational health and safety requirements.

All business and corporate service units of the Company are mandated to comply with all legislative occupational health and safety requirements as they relate to the planning, operation and maintenance of facilities and equipment usage, for the health and welfare of all Company stakeholders, including the customers.

Supplier/contractor selection practice

The Company adopted the Quality Management System (QMS) which defines and interacts with all activities of the organization, beginning with the identification of customer requirements and ending with their satisfaction, at every transaction interface, which include the methods for supplier/ contractor selection.

The Company follows a procedure of bidding or request for proposals from prospective suppliers/ contractors. Suppliers are selected based on price and/or skill and experience.

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Environmentally friendly value-chain

The Company is committed to strike a balance between economic growth, social development and environmental stewardship in the conduct of its business. The Company implements programs that promote environmental preservation as well as social and economic development in the communities where its businesses operate.

Management provides and maintains a healthy and safe work environment in accordance with industry standards and in compliance with legislative requirements. All Team Members are equally responsible for maintaining healthy and safe workplaces that minimize the probability for accidents or hazardous incidents.

Community interaction The Company’s broader obligations to society and the community are addressed by the Company’s continued compliance with its Manual, with all relevant laws and regulations, and the principles of sustainable development practices by the Company and our BUs. The Company is committed to strike a balance between economic growth and social development and environmental stewardship, in the conduct of its business.

The Aboitiz Group, driven by its passion for a better world, continues to pursue initiatives to help enrich the planet through various sustainable projects that it has implemented in 2012. The biggest highlight of its “green efforts” in 2013 was the planting of 2.68 million seedlings all across the country under the Group’s Aboitiz Passion for Reforest and Agro-forest to Keep (APARK) Program, well in advance of its initiative to plant 3 million trees by 2015. The Company, through the Aboitiz Foundation, also initiated CSR activities which focus on three programs components namely: education, enterprise development and environment supported by corporate donations of its BUs. In 2013, Aboitiz Foundation, Inc. provided strong leadership in the country in disaster relief operations in Visayas and Mindanao as it mobilized and organized efforts to help the disaster victims to pick-up their lives from the devastating effects of the Bohol and Central Visayas earthquake in October 2013 and Typhoon Haiyan or Yolanda in November 2013 that hit across a wide area of coverage in Central Philippines. Aboitiz Foundation spearheaded its #BangonVisayas relief efforts in response to the natural calamities that left a trail of loss across the Visayas and the Aboitiz Challenge project to raise P200 million in funds for the relief, rehabilitation, rebuilding, and reconstruction work in the affected areas of Typhoon

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Yolanda. Through the initiative and generosity of the various BUs, partners, friends, and donors, the campaign successfully raised P208 million for this purpose. Through its commitment to give back to the community, the employees also initiated projects such as Christmas outreach and participation in Brigada Eskwela.

Anti-corruption programmes and procedures

As a publicly-listed company, the Company is subject to numerous stringent laws and regulations. All Company employees are made aware of their responsibility to know and understand the laws applicable to their respective job responsibilities and are directed to comply with both the letter and the spirit of these laws.

One such policy is the non-acceptance of gifts from persons who have a beneficial relationship with the Company. The Company makes it a point that employees know that gifts and special favors may create an inappropriate expectation or feeling of obligation.

Safeguarding creditors' rights In dealings with its customers, suppliers and business partners, the Company abides by the Fair Dealing Policy found in its Code.

Every employee, officer and director therefore always prioritizes the best interests of the Company’s clients and endeavors to deal fairly with suppliers, competitors, the public and one another. No one should take unfair advantage of anyone through manipulation, abuse of privileged information, misrepresentation of facts or any other unfair dealing practice.

The Board of Directors of the Company also approved in its regular meeting held on July 24, 2014 the amendments to the Company’s Manual of Corporate Governance as mandated by SEC Memorandum Circular No. 9-2014. These amendments reflect the thrust of the Company to protect and uphold the rights and interests not only of the shareholders but also of its other stakeholders. (Updated as of December 31, 2014)

(c) Does the company have a separate corporate responsibility (CR) report/section or sustainability report/section?

The Company through its foundation, Aboitiz Foundation, Inc. (AFI), undertakes a committed Corporate Social Responsibility program. The Annual Report of AFI is published and also circulated to AEV shareholders. Linkage to AFI Annual Report is also available in the AEV website. Moreover, the Company publishes a separate Sustainability Report which shows its initiatives in the protection of the environment guided by its triple bottomline approach of People, Planet, and Profit. (Updated as of December 31, 2013)

(d) Performance-enhancing mechanisms for employee participation.

A. What are the company’s policy for its employees’ safety, health, and welfare?

The Company has a Corporate Policy on Occupational Health and Safety, which mandates Management to eliminate any potential hazards or work situations that may result to property loss or damage, accidents or personnel illness and injury. It is the policy of the Company to protect both people and property.

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1. Each team member is required to observe the following health and sanitation rules to protect

and safeguard his own health and those of his fellow team members. a) Proper health rules should be observed with respect to use of handkerchiefs and, washing

hands, etc. b) The comfort and sanitary facilities should be used properly and maintained clean and in

good order at all times. c) All refuse and rubbish should be placed or thrown into the appropriate containers. d) A presentable and neat appearance of the office premises should be kept at all times. e) When a team member has reason to believe that he has a contagious disease, he should notify

his Team Leader. The team member should be made to stay away from the office or Company premises to prevent the spread of the disease to other team members until he has been given clearance by the Company Doctor that the danger from such condition has passed. In this case, the rules on leaves shall apply.

f) All team members are required to undergo an annual physical & dental check-up by the Company Doctor and dentist, respectively. Human Resources shall coordinate with Team Leaders in preparing a schedule of team members visit to the Doctor/Dentist for this annual check-up.

In case of fire or robbery in the premises of the Company, the first officer or employee who detects or notices it should immediately sound the fire alarm or report the robbery. Depending on the circumstances, he should attempt to put-out the fire or take action to prevent loss or destruction of company property or funds. When a fire alarm is raised or a robbery is detected, employees should maintain presence of mind and should avoid creating panic among themselves and the public within the premises of the Company to minimize further aggravation of the situation.

2. The Company has protocols in place to support sustainability commitments. The Company publishes a separate Sustainability Report which shows its initiatives in the protection of the environment through the five pillars of Rejuvenate Nature, Re-use/Recycle, Reduce, Renewable Energy, and Recharge Communities.

B. Show data relating to health, safety and welfare of its employees.

The programs and strategic initiatives of the Human Resources (HR) Department are covered within the categories of Body and Physical Wellness programs (e.g. Compensation and Benefits Information, Health Talks, Aerobics/ Zumba Fitness, Biggest Loser Competition, Fitness Clubs and Safety and Protection Programs); Belongingness (Coffee with the President, Company Events, Quality Focus, Refer an A-Person, Creating the Future Organization, Birthday Announcements, Employee’s Recognition, Team Celebrations, Good Health Bonus, Annual Merit Increase and Promotions); Soul and Spirit , Sense of Purpose (CSR Activities); and Learning and Growth (Universal Training Programs and other work-related trainings, E-learning, Educational Leave and Assistance, Financial Wellness, SuccessFactors, Computer Loan and U-21). These initiatives recently won in the Company’s Team Awards for Driven to Excel category. The Corporate HR’s mission is to “To Attract, Retain and Optimize our A-people and constantly adding value to our businesses”. This mission aims to expand the Company’s reach to identify talent, to continue to develop the Aboitiz Talent Management Program (ATMP), to strengthen traditional programs targeted at the “Body and Mind” and to expand retention programs to include more “Heart and “Spirit”. The Company is committed to the value proposition of the 4Ps: People, Planet, Profit, and Passion. Below are examples of the health, safety, and welfare practices of the Company’s Business Units which reflect the Aboitiz Group’s policies:

1. In 2013, Davao Light & Power Company, Inc. initiated the Intensified Safety or I-Safety Campaign, which aims to inform its customers on the hazards of electricity so they can

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avoid accidents. Aside from giving information on the risks related to electricity, the campaign also included an anti-pilferage presentation aimed at educating and protecting the customers from unscrupulous acts related to electricity theft. There were also presentations on energy saving tips and how to read an electric meter to help them manage their electricity.

2. Hedcor, an AboitizPower subsidiary, was recently awarded the Gawad Kaligtasan and Kalusugan Award for Occupational Safety and Health by the Department of Labor (DOLE) and the Safety Milestone Award by the Bureau of Working Conditions.

3. In 2013, AboitizPower subsidiaries Hedcor Sibulan, Inc. and Hedcor, Inc. were both ISO-

certified. Hedcor Sibulan secured another three International Organization for Standardization certificates while Hedcor, Inc. successfully obtained recertification. After a series of audits and testing, Certification International Philippines, Inc. (CIP), a local ISO certifying company, awarded to Hedcor Sibulan, Inc. the 90001:2008 or Quality Management System, 14001:2004 or Environmental Management System, and OHSAS 18001:2007 or Occupational Health and Safety Management. Since being commissioned in 2010, Hedcor Sibulan has been supplying clean and renewable energy to Davao City without compromising the company’s mission to operate, develop, and improve efficiency of plants.

4. Pilmico Foods Corporation merited a re-certification for its ISO 9001:2008/hazard analysis

and critical points control/good manufacturing practice. Pilmico Foods was given its formal re-certification and has been continuously recognized as an ISO 9001:2008 / Hazard Analysis & Critical Control Points (HACCP) / Good Manufacturing Practice (GMP)-certified company. The ISO 9001:2008/ HACCP/GMP re-certification audit required Pilmico to review, improve and manage the processes necessary for the continual improvement of its quality management system. It is also designed to provide the company with a set of principles that ensures a systematic approach in achieving customer satisfaction.

C. State the company’s training and development programmes for its employees. Show the data.

Corporate HR has a universal training passport (UTP) program for all employees, including the Principles of Quality Living, Seven Habits, Creating the Future Organization, Basic Quality Awareness, Working Program, to name just a few technical in-house training skills. The Company adheres to a merit-based performance incentive pay compensation package that includes some form of employee stock ownership plans, merit increase schemes and bonus schemes for performance and incentives to employees. The Company offers not only statutory benefits but also additional internal benefit programs to enhance the quality of life of our employees.

D. State the company’s reward/compensation policy that accounts for the performance of the company beyond short-term financial measures

The Aboitiz employee benefit package aims to foster a culture that recognizes, rewards and celebrates the Aboitiz values and culture across the group. The Company’s HR Department recently launched an Inspired by Passion campaign to provide an organized and purposive framework for all HR Initiatives and promote a thematic communication plan coming from the HR pillars of Attraction, Retention and Optimization. The Company is committed in addressing its employees’ four basic needs in the organizations.

4) What are the company’s procedures for handling complaints by employees concerning illegal (including corruption) and unethical behaviour? Explain how employees are protected from retaliation.

Below is the Company’s policy in the enforcement and administration of its Code of Ethics and Business Conduct: a) Reporting Violations

“You are the Company's first line of defense against unethical business practices and violations of the law. If you observe or become aware of any conduct that you believe is unethical or unlawful—

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whether by another employee, a consultant, supplier, client, or other third party—you must communicate that information to your direct supervisor or, if appropriate or necessary, senior management. They will notify and consult with Law, Compliance, or Corporate Security, and take appropriate steps to stop the misconduct and prevent its recurrence. If appropriate or necessary, you may also raise your concerns directly with Law, Compliance or Corporate Security. If you are a supervisor, you have an additional responsibility to take appropriate steps to stop any misconduct that you are aware of, and to prevent its recurrence. Supervisors that do not take appropriate action may be held responsible for failure to supervise properly. If you prefer to report an allegation anonymously, you must provide enough information about the incident or situation to allow the Company to investigate properly. AEV will not tolerate any kind of retaliation for reports or complaints regarding the misconduct of others that were made in good faith. Open communication of issues and concerns by all employees without fear of retribution or retaliation is vital to the continued success of the Company. Unless appropriate Company management learns of a problem, the Company cannot deal with it. Concealing improper conduct often compounds the problem and may delay or hamper responses that could prevent or mitigate actual damage.”

b) The Company has a program of “Talk to EIA” or talk to the CEO through e-mail on any matter. This is an additional confidential venue for any whistle-blowing. In early 2014, this program was formally adopted as the avenue for the Company’s Whistleblowing Policy. A “Talk to the Chairman” avenue will likewise be implemented by the Company as an added venue to encourage whistleblowing within the Company.

c) All Team Members and Team Leaders may at anytime report to the Aboitiz Chief Compliance Officer for any violations.

B. I. DISCLOSURE AND TRANSPARENCY

(a) Ownership Structure

A. Holding 5% shareholding or more

Shareholder Number of Shares Percent Beneficial Owner

Aboitiz & Company, Inc.

2,735,600,915 49.3917% Aboitiz & Co., Inc.

PCD Nominee Corp. (Filipino)

555,979,566 9.7127% PCD participants acting for themselves or for their customers.

PCD Nominee Corp. (Foreign)

537,793,725 10.5739% PCD participants acting for themselves or for their customers.

Ramon Aboitiz Foundation, Inc.

424,538,863 7.6651% Foundation

(Updated as of September 30, 2014)

Name of Senior Management Number of Direct shares

Number of Indirect shares / Through (name of record owner)

% of Capital Stock

No member of senior management is a significant shareholder of the Company

TOTAL

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(b) Does the Annual Report disclose the following:

Key risks Yes

Corporate objectives Yes

Financial performance indicators Yes

Non-financial performance indicators Yes

Dividend policy Yes

Details of whistle-blowing policy Yes Biographical details (at least age, qualifications, date of first appointment, relevant experience, and any other directorships of listed companies) of directors/commissioners

Yes

Training and/or continuing education programme attended by each director/commissioner

Yes

Number of board of directors/commissioners meetings held during the year Yes

Attendance details of each director/commissioner in respect of meetings held Yes

Details of remuneration of the CEO and each member of the board of directors/commissioners

Yes

Should the Annual Report not disclose any of the above, please indicate the reason for the non-disclosure.

Disclosed in the Annual Corporate Governance Report appended to the Annual Report and available on the Company website (circulated in digital format and published on the website).

(c) External Auditor’s fee

Name of auditor Audit Fee Non-audit Fee

SGV & Co. Php389,760.00 Php896,000.00

Source: 2014 Information Statement (SEC 20-IS)

(d) Medium of Communication List down the mode/s of communication that the company is using for disseminating information.

The Company uses the following modes of communication for disseminating information:

1. Newspaper publications 2. Company Website 3. Personal notices 4. Disclosures and corporate reports to regulatory agencies 5. Regular meetings, briefings to analysts and institutional shareholders, and shareholders and

media briefings

(e) Date of release of audited financial report:

The Company’s 2013 Audited Financial Statement was filed with the Bureau of Internal Revenue and the Securities and Exchange Commission on 10 April 2014 and 11 April 2014, respectively, and the same was submitted as an attachment to the Company’s Annual Report (Form 17-A) to the Philippine Stock Exchange on 15 April 2014.

(f) Company Website

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Does the company have a website disclosing up-to-date information about the following?

Business operations Yes

Financial statements/reports (current and prior years) Yes

Materials provided in briefings to analysts and media Yes

Shareholding structure Yes

Group corporate structure YYes

Downloadable annual report Yes

Notice of AGM and/or EGM Yes

Company's constitution (company's by-laws, memorandum and articles of association)

Yes

Should any of the foregoing information be not disclosed, please indicate the reason thereto.

(g) Disclosure of RPT

RPT Relationship Nature Value Service contracts at fees based on agreed rates

Various AEV subsidiaries Professional and technical assistance

P601,631,000.00

Cash deposits and placements

UnionBank of the Philippines (Subsidiary)

Interest income on deposits and money market placements

P4,100,000.00

Temporary advances due to subsidiaries

CPDC and AVI (subsidiaries)

Interest expense P433,000.00

Aviation services rendered by AEV Aviation

ACO and other subsidiaries

Aviation service income P21,134,000.00

Investments in Retirement Plan

AEV, UBP and AP shares of stock

Dividends P560,926.00

Source: � ote 11 of 201� �u�ite� �inancia� Statement a��en�e� to t�e �nnua� �e�ort

(SEC �orm 1��) 2014 �efiniti�e Information Statement (SEC �orm 20-IS)

When RPTs are involved, what processes are in place to address them in the manner that will safeguard the interest of the company and in particular of its minority shareholders and other stakeholders?

The nature and extent of transactions with affiliated and related parties are disclosed annually to shareholders through the Company’s Information Statement, Annual Report and Audited Financial Statements. The Company and its subsidiaries enter into related party transactions consisting of payment of shareholder advances, professional fees and rental fees. These are made on an arm’s length basis and at current market prices at the time of the transactions. Service and management contracts are also entered into with subsidiaries and affiliates for corporate center services, such as human resources support services, internal audit services, legal and corporate compliance services, treasury and corporate finance services, technology infrastructure services. These services are obtained from the Company to enable the Aboitiz group of companies to realize cost synergies. The Company maintains a pool of highly qualified professionals with in-depth business expertise specific to the businesses of the AEV organization. Transactions are priced on a cost recovery basis. In addition, transaction costs are always benchmarked to third party rates to ensure competitive pricing. Service Level Commitments and Agreements are executed to ensure quality and timeliness of services.

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C. J. RIGHTS OF STOCKHOLDERS 1) Right to participate effectively in and vote in Annual/Special Stockholders’ Meetings

(a) Quorum

Give details on the quorum required to convene the Annual/Special Stockholders’ Meeting as set forth in its By-laws.

Quorum Required majority of the outstanding capital stock of the Company, in accordance with the Corporation Code of the Philippines

(b) System Used to Approve Corporate Acts

Explain the system used to approve corporate acts.

System Used Voting by poll

Description Shareholders cast their vote on any resolution through the use of ballots.

(c) Stockholders’ Rights

List any Stockholders’ Rights concerning Annual/Special Stockholders’ Meeting that differ from those laid down in the Corporation Code.

Stockholders’ Rights under

The Corporation Code Stockholders’ Rights not in

The Corporation Code The Company’s shareholders have the following rights in accordance with the Corporation Code:

1. Voting right (one share- one vote) 2. Pre-emptive right 3. Power to inspect corporate books 4. Right to information 5. Right to dividends 6. Appraisal right 7. Cumulative voting right

All rights granted by the Corporation Code are likewise granted to the Company’s shareholders.

Dividends

(d) Stockholders’ Participation

1. State, if any, the measures adopted to promote stockholder participation in the Annual/Special

Stockholders’ Meeting, including the procedure on how stockholders and other parties interested may communicate directly with the Chairman of the Board, individual directors or board committees. Include in the discussion the steps the Board has taken to solicit and understand the views of the stockholders as well as procedures for putting forward proposals at stockholders’ meetings.

Declaration Date Record Date Payment Date

March 1, 2012 (regular) March 16, 2012 April 3, 2012

March 5, 2013 (special) March 19, 2013 April 15, 2013


March 11, 2014 (special) March 25, 2014 April 22, 2014


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Measures Adopted Communication Procedure The Company ensures the presence of important resource persons during the Annual Stockholders Meeting (ASM), such as the directors, management and the external auditor, to ensure that shareholder queries are adequately answered.

Notice and agenda items are disseminated to stockholders. Media briefings are likewise conducted by the Chief Executive Officer and Chief Financial Officer after the ASM.

Publication of notices in several newspapers and the company website

All instructions disclosed for shareholders to participate actively in the ASM

Shareholders who cannot attend the ASM may vote in absentia through proxies

Proxies are sent out by the Company together with the Notice to the ASM. Proxies are likewise made available in the company website.

2. State the company policy of asking shareholders to actively participate in corporate decisions regarding:

a. Amendments to the company's constitution b. Authorization of additional shares c. Transfer of all or substantially all assets, which in effect results in the sale of the company

The Company, through notices, newspaper publications, and postings in the company website, analysts briefings, media briefings, shareholders’ briefings, and disclosures to the PSE and SEC, as the case may be, ensures the right of shareholders to participate in decisions concerning fundamental corporate changes in compliance with the Corporation Code, such as amendments of the Company’s Articles of Incorporation and By-Laws, issuance of new shares of stock, and sale of all or substantially all corporate properties.

3. Does the company observe a minimum of 21 business days for giving out of notices to the AGM where

items to be resolved by shareholders are taken up? a. Date of sending out notices:

April 25, 2014. The notice was likewise published by the Company on April 16, 2014.

b. Date of the Annual/Special Stockholders’ Meeting:

May 19, 2014

4. State, if any, questions and answers during the Annual/Special Stockholders’ Meeting.

During Annual Stockholders’ Meeting on May 19, 2014, the following matters were raised: a. Mr. Guillermo Gili, Jr., stockholder under PCD Nominee Corporation, inquired from the Board

of Directors on how prepared Union Bank of the Philippines (UnionBank) is for ASEAN Integration in 2018. Director Justo A. Ortiz (JAO), who is also UnionBank’s Chairman and Chief Executive Officer, answered that UnionBank is focused on building relationships and doing businesses where it can engage its customers. JAO explained that UnionBank continues to focus on its cash management products which are clearly market leaders and competitive on a region-wide basis. He also discussed the company’s plan to increase its scale of operations inorganically.

b. Mr. Elias D. Dulalia, congratulated the Company for the distribution of cash dividends to all

stockholders. He also asked the Board of Directors about the Company’s plans to ease the critical condition of power supply in Mindanao. Mr. Erramon I. Aboitiz (EIA), President and Chief Executive Officer of the Company, responded that a 300-MW coal plant is in its final stage of construction, with the expected completion of the first and second units early next year. EIA also explained that there are pending applications with regulatory bodies to increase the plant capacity of Therma South Inc. Furthermore, EIA informed the stockholders of the additional capacity to be contributed to the Mindanao Grid by the recently inaugurated 14 MW run-of-river Tudaya hydropower electric power plant.

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c. Stockholder Emilio de la Cerna inquired about the possible distribution of stock dividends by

the Company. EIA explained that the Company has been following its policy in the distribution of cash dividends.

5. Results of the 2014 Annual Stockholders’ Meeting’s Resolutions

Resolution Approving Dissenting Abstaining Resolution No. 2014-1 "RESOLVED, that the stockholders of Aboitiz Equity Ventures, Inc. (the "Company") approve, as it hereby approves the Annual Report and Audited Financial Statements of the Company as of December 31, 2013."

4,890,036,980 0 2,222,700

Resolution No. 2014-2 “RESOLVED, that the stockholders of Aboitiz Equity Ventures, Inc. (the "Company") approve, as it hereby approves the delegation of the authority to elect the Company's external auditor for 2014 to the Board of Directors."

4,865,912,620 26,157,060 190,000

Resolution No. 2014-3 “RESOLVED, that the stockholders of Aboitiz Equity Ventures, Inc. (the “Company”) approve, ratify and confirm as it hereby approves, ratifies and confirms all contracts, investments and resolutions issued and all other acts and proceedings of the Board of Directors, Corporate Officers and Management of the Company for the past year 2013 and including all acts up to May 19, 2014.”

4,890,019,120 0 2,240,560

Resolution No. 2014-4 “RESOLVED, that the

4,636,793,265 251,952,198 3,514,217

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stockholders of Aboitiz Equity Ventures, Inc. (the “Company”) approve, as it hereby approves the amendment of Article II of the Company’s Amended Articles of Incorporation, as follows:

Article II. Secondary Purpose x x x 2. To borrow or raise money necessary to meet the financial requirements of its businesses and for any of the purposes of the corporation, and from time to time, to draw, make, accept, endorse, transfer, assign, execute, and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable and transferable instruments and other evidence of indebtedness or issue third party accommodations, sureties to its affiliated corporations and guarantees, or otherwise lend its credit to its subsidiaries and affiliates and to another person or corporation, and for the purpose of securing any of its obligations or contracts, to convey, transfer, assign, deliver, mortgage and/or pledge, or enter into deed of trust or allow the creation of lien upon,

99

all or any part of the properties or assets at any time held or owned by the corporation, and to issue pursuant to law shares of its capital stock, debentures, and other evidence of indebtedness in payment for properties acquired by the corporation or for money borrowed in the prosecution of its lawful business. x x x 7. To establish and operate one or more offices or agencies and to carry on any or all of its operations and business without any restrictions as to place or amount, including the right to hold, purchase, acquire, lease, mortgage, pledge, and convey or otherwise deal in and with real and personal property anywhere within the Philippines. x x x 9. To offer shares out of its original or of its increased capital stock to the public for subscription, subject to the requirements provided by law. x x x 10. To enter into and perform contracts of any kind, and nature and business purpose with any person, firm, or corporation; including but not limited to contracts creating rights,

100

easements, and other privileges relating to any of the property, real or personal, of any kind owned by the corporation; and in the conduct of its business and for the purpose of attaining or furthering any of its purposes, to do any and all other acts and things, to exercise any and all other powers which a natural person could do and exercise and which are now or may hereafter be authorized by law. x x x

RESOLVED FINALLY, that the stockholders designate the Corporate Secretary and his/her representatives to file the necessary documents and applications with the Securities and Exchange Commission for approval.” Resolution No. 2014-5 “RESOLVED, that the stockholders of Aboitiz Equity Ventures, Inc. (the “Company”) approve as it hereby approves the renewal of the delegated authority to the Board of Directors to amend or repeal the Company’s By-Laws or adopt new By-Laws.”

4,624,565,950 267,485,870 207,860

6. Date of publishing of the result of the votes taken during the most recent AGM for all resolutions: The results of the votes taken during the May 19, 2014 Annual Stockholders Meeting were posted in the Company’s website on May 20, 2014.

(e) Modifications

State, if any, the modifications made in the Annual/Special Stockholders’ Meeting regulations during the most recent year and the reason for such modification:

Modifications Reason for Modification

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For 2014 ASM, the Company has decided to appoint an independent party, Luis Canete & Co., to count and validate votes taken during the ASM.

To adopt best corporate governance practices.

(f) Stockholders’ Attendance

(i) Details of Attendance in the Annual/Special Stockholders’ Meeting Held:

Type of Meeting

Names of Board members / Officers

present Date of Meeting

Voting Procedure (by

poll, show of hands,

etc.)

% of SH Attendi

ng in

Person

% of SH in Proxy

Total % of SH

attendance

Annual Stockholders’ Meeting

1. Mr. Jon Ramon Aboitiz - Chairman, Board of Directors and Board Corporate Governance Committee/ Member, Board Risk Management Committee

2. Mr. Erramon I.

Aboitiz - President & Chief Executive Officer

3. Mr. Enrique M.

Aboitiz, Jr. - Chairman, Board Risk Management Committee

4. Mr. Justo A.

Ortiz - Member, Board Audit Committee and Board Risk Management Committee

5. Justice Jose C. Vitug (ret.) - Independent Director/ Member, Board Corporate Governance Committee/ Chairman, Board

May 19, 2014 Vote 0.005% 88.11% 88.11%

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Audit Committee

6. Mr. Stephen

CuUnjieng - Independent Director/ Member, Board Corporate Governance Committee, Board Risk Management Committee and Board Audit Committee

7. Mr. Raphael P.M. Lotilla – Independent Director/Member, Board Corporate Governance Committee/Member, Board Audit Committee

Officers present

during the 2014

Annual Stockhold

ers’ Meeting

1. Mr. Stephen G. Paradies

2. Ms. M. Jasmine

S. Oporto 3. Ms. Melinda R.

Bathan 4. Ms. Catherine R.

Atay 5. Ms. Susan V.

Valdez 6. Mr. Dave

Michael Valeriano

7. Ms. Nikoline

Felding 8. Mr. Roman V.

Azanza III 9. Ms. Annacel A.

Natividad

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10. Ms. Aylmerita

Peñaloza 11. Mr. Ronaldo S.

Ramos 12. Mr. Francisco

Victor G. Salas 13. Ms. Maria

Lourdes Y. Tanate

Special Stockhold

ers’ Meeting

No Special Stockholders’ Meeting was held during the year 2014.

(ii) Does the company appoint an independent party (inspectors) to count and/or validate the votes at the ASM/SSMs?

The Company has appointed an independent party, Luis Canete & Co., to count and validate the votes for the May 19, 2014 Annual Stockholders’ Meeting.

(iii) Do the company’s common shares carry one vote for one share? If not, disclose and give reasons for

any divergence to this standard. Where the company has more than one class of shares, describe the voting rights attached to each class of shares.

The share capital of the Company consists of one class of listed common shares and a class of non-listed preferred shares. All common shares are voting following the rule of One share - One vote. The preferred shares are non-voting, non-participating, non-convertible, cumulative, re-issuable shares and may be issued from time to time by the Board in one or more series. These preferred shares which are issued to financial institutions or financial market intermediaries are treated as debt instruments by the Company in its books in conformity with the Philippine Accounting Standards (which adopt the International Financial Reporting Standards.

(g) Proxy Voting Policies

State the policies followed by the company regarding proxy voting in the Annual/Special Stockholders’ Meeting.

Company’s Policies

Execution and acceptance of proxies The Office of the Corporate Secretary accepts and validates the proxies.

Notary Proxy is not required to be notarized.

Submission of Proxy

A deadline is set by the Corporate Secretary in the submission of proxies which is seven (7) days prior to the opening of the meeting, in accordance with the Company’s By-laws.

Several Proxies

There is no occasion to require several proxies since all items requiring the vote of a particular stockholder are already set out in the proxy. Several proxies received from the same stockholder pertaining to the same shares shall be subject to validation

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by the Office of the Corporate Secretary.

Validity of Proxy A proxy shall be valid only when received by the Corporate Secretary on or before the deadline, at least seven (7) days before the ASM.

Proxies executed abroad Proxies executed locally or abroad have the same effect.

Invalidated Proxy Invalidated proxies do not carry any force or effect.

Validation of Proxy The validation of proxies is done by the Office of the Corporate Secretary.

Violation of Proxy Votes through proxies are tabulated to ensure that the votes therein are followed.

(h) Sending of Notices

State the company’s policies and procedure on the sending of notices of Annual/Special Stockholders’ Meeting.

Policies Procedure

The Company gives the shareholders sufficient time to go over information in the Notice to the ASM and to contact their proxies for appropriate instructions.

The Company consistently provides all shareholders with the notice and agenda of the annual general meeting at least thirty (30) days before a regular meeting and twenty (20) days before a special meeting. The Company also publishes Notices of Shareholders’ Meetings in national newspapers of general circulation. Under the Company’s By-Laws, shareholders may call a special shareholders’ meeting, submit a proposal for consideration at the annual general membership or the special meeting.

(i) Definitive Information Statements and Management Report

Number of Stockholders entitled to receive Definitive Information Statements and Management Report and Other Materials

Total: 9,616 Active shareholders given copies: 5,716 PCD Nominees were given copies for shareholders.

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by market participants/certain beneficial owners

April 22, 2014

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by stockholders

April 22, 2014

State whether CD format or hard copies were distributed

Both digital format and printed copies were distributed.

If yes, indicate whether requesting stockholders were provided hard copies

Digital copies: 4,770 Printed copies: 247 E-mail: 97

(j) Does the Notice of Annual/Special Stockholders’ Meeting include the following:

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Each resolution to be taken up deals with only one item. Yes

Profiles of directors (at least age, qualification, date of first appointment, experience, and directorships in other listed companies) nominated for election/re-election.

Yes

The auditors to be appointed or re-appointed. No

An explanation of the dividend policy, if any dividend is to be declared. Yes

The amount payable for final dividends. Yes

Documents required for proxy vote. Yes

Should any of the foregoing information be not disclosed, please indicate the reason thereto.

The authority to appoint the Company’s external auditors for 2014-2015 was delegated by the shareholders to the Board of Directors. At the time of the ASM, the external auditors to be appointed by the Company was not yet identified.

2) Treatment of Minority Stockholders

(a) State the company’s policies with respect to the treatment of minority stockholders. The By-laws and Amended Manual of Corporate Governance of the Company provide for the policies below:

Policies Implementation

A director shall not be removed without cause if it will deny minority shareholders representation in the Board.

The Compliance Officer shall be responsible for determining violation/s through notice and hearing and shall recommend to the Chairman of the Board the imposable penalty for such violation, for further review and approval of the Board.

The minority shareholders shall be granted the right to propose the holding of a meeting, and the right to propose items in the agenda of the meeting, provided the items are for legitimate business purposes.

The Compliance Officer shall be responsible for determining violation/s through notice and hearing and shall recommend to the Chairman of the Board the imposable penalty for such violation, for further review and approval of the Board.

The minority shareholders shall have access to any and all information relating to matters for which the management is accountable for and to those relating to matters for which the management shall include such information and, if not included, then the minority shareholders shall be allowed to propose to include such matters in the agenda of shareholders’ meeting, being within the definition of “legitimate purposes”.

Upon request made to the Investor Relations Officer and/or to the Office of the Corporate Secretary, a minority shareholder may request for information or documents relating to matters for which the management shall include such information and, if not included, then the minority shareholders shall be allowed to propose to include such matters in the agenda of shareholders’ meeting, being within the definition of “legitimate purposes”. The Compliance Officer is responsible for determining violation/s through notice and hearing and shall recommend to the Chairman of the Board the imposable penalty for such violation, for further review and approval of the Board.

Although all shareholders should be treated equally or without discrimination, the Board

The Compliance Officer shall be responsible for determining violation/s through notice and

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should give minority shareholders, in accordance with the By-laws, the right to propose the holding of meetings and the items for discussion in the agenda that relate directly to the business of AEV.

hearing and shall recommend to the Chairman of the Board the imposable penalty for such violation, for further review and approval of the Board.

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(b) Do minority stockholders have a right to nominate candidates for board of directors?

The Company’s Guidelines for the Nomination and Election of Independent Directors approved in 2007 allows minority shareholders to nominate candidates for the board of directors within the period provided under the By-laws and the guidelines promulgated by the Board Corporate Governance Committee. This policy is reiterated to stockholders every Annual Stockholders Meeting.

D. K. INVESTORS RELATIONS PROGRAM 1) Discuss the company’s external and internal communications policies and how frequently they are reviewed.

Disclose who reviews and approves major company announcements. Identify the committee with this responsibility, if it has been assigned to a committee.

Pursuant to the corporate governance principle of disclosure and transparency, information on the Company is made readily available. The Company provides shareholders with periodic reports that include information about the Board of Directors and key officers, including relevant professional information on the Directors and Officers, their shareholdings and dealings with the Company and their aggregate compensation. The Investor Relations Officer and the Office of the Corporate Secretary have an established communications strategy and protocols to promote effective communication and liaison with shareholders. Annual reports and financial statements of the Company may be secured without cost or restrictions and these are also available at the Company’s website. 1. The Investor Relations Officer communicates with institutional investors through the Company’s

webpage, e-mail, and conference calls. In addition, the Investor Relations Officer communicates with investors through comprehensive reports on its operations, particularly the Company’s Report to Stockholders in the Annual Report and through its investors’ briefings, investor conferences, non-deal road shows and one-on-one meetings.

2. The Chief Reputation Officer approves corporate announcement after consensus with the Chief Executive Officer and Chief Financial Officer.

3. The Chief Compliance Officer approves all disclosures. 4. The Board of Directors has oversight on matters which are disclosed.

In the case of internal communication, the Company has adopted, through its Reputation Management Department, an Internal Communication Flow Policy to ensure relevant and crucial information is shared across the Aboitiz Group and provided to key stockholders in a timely and orderly manner.

2) Describe the company’s investor relations program including its communications strategy to promote effective communication with its stockholders, other stakeholders and the public in general. Disclose the contact details (e.g. telephone, fax and email) of the officer responsible for investor relations.

Details

(1) Objectives The Investor Relations Office assures shareholders and investors of an easy and direct access to officially designated spokespersons for clarifying information and issues as well as dealing with investor concerns.

(2) Principles The Company believes in the value of its shareholders and ensures that its shareholders and investors receive timely,

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relevant, balanced, high-quality and understandable information about the Company.

(3) Modes of Communications The Company’s commitment to its shareholders is reiterated annually through its comprehensive reports on its operations, particularly the Company’s Report to Stockholders in the Annual Report and through its investors’ briefings, investor conferences, non-deal road shows and one-on-one meetings. The Company continually plans website content management initiatives to regularly keep its shareholders updated with the latest Company developments. The Investor Relations Office conducted and is scheduled to conduct investors’ briefings in March 12, May 7, July 31 and October 29, 2014 as forums for investors to discuss the Full Year 2013 Financial Operating Results, First Quarter 2014 Financial and Operating Results, First Half 2014 Financial and Operating Results and Third Quarter 2014 Financial and Operating Results.

(4) Investors Relations Officer Investor Relations Mr. Dave Michael V. Valeriano Aboitiz Equity Ventures, Inc. Tel (632) 886 -2702 Email: [email protected] www.aboitiz.com 2014 Analysts’ Briefings: March 12, 2014 - Analysts' Briefing for FY 2013 results May 7, 2014 - Analysts' Briefing for 1Q 2014 results July 31, 2014 - Analysts' Briefing for 2Q/1H 2014 results October 29, 2014 - Analysts' Briefing for 3Q/9M 2014 results

3) What are the company’s rules and procedures governing the acquisition of corporate control in the

capital markets, and extraordinary transactions such as mergers, and sales of substantial portions of corporate assets?

The Company ensures the right of shareholders to participate in decisions concerning fundamental corporate changes in compliance with the provisions of the Corporation Code, such as amendments of the Company’s Articles of Incorporation and By-Laws, issuance of new shares of stock, and sale of all or substantially all corporate properties. Moreover, in the event of mergers/acquisitions or takeovers, stockholders have the right to approve or reject the same in accordance with the requirements of the Corporation Code.

Name of the independent party the board of directors of the company appointed to evaluate the fairness of the transaction price.

The Company engages, when necessary, the services of an independent consultant or financial advisor who are experts in their fields.

E. L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Discuss any initiative undertaken or proposed to be undertaken by the company.

The Company’s Aboitiz Foundation, Inc., the foundation through which the Aboitiz Group undertakes their Corporate Social Responsibility initiatives, has contributed in social development projects in the year 2013,

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including among the numerous activities, the following highlights:

Initiative Beneficiary

Priority programs in infrastructure building, scholarship programs and asset donations.

The Foundation partnered with AGAPP Foundation to build an additional 40 classrooms in 2014, or a total of 174 classrooms built.

Focus on education, enterprise development, and environment.

The Foundation has allocated a total of P272 Million for social development programs and projects.

#Bangon Visayas Disaster Relief Operations Relief efforts initiated by the Aboitiz Group in response to calamities which devastated the Visayas Region in 2013.

Aboitiz Challenge Raised P200 Million in funds for the relief, rehabilitation, rebuilding, and reconstruction work for areas affected by Typhoon Yolanda.

Education-related initiatives A total of P151 Million was allocated by the Foundation for education-related initiatives. This includes the initiative to develop special science elementary schools and tech-voc secondary schools nationwide.

Grant of microfinance loans. Partners in Cebu, Davao and Benguet. Relief operations for calamity struck areas. WeatherPhilippines Foundation Inc. is on its second

year of implementation to assist in predicting weather conditions in the country by donating 1,000 weather stations nationwide.

F. M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL

Disclose the process followed and criteria used in assessing the annual performance of the board and its committees, individual director, and the CEO/President.

Process Criteria

Board of Directors Annually distributed to the Board to determine the Board’s strengths and weaknesses. The performance appraisal on the individual director, the CEO/ President, or the Board, as the case may be, is collated by Board Secretariat. The results of the appraisal are then discussed by the Board Corporate Governance Committee. Any issues arising from the discussion of the Committee is submitted to the members of the Board of Directors which shall address the issues.

Rating is conducted on the following areas: I. Functions of the Board II. The Board and the Company Senior Management III. Board Meetings and Facilities IV. Board Composition V. Board Committees

Board Committees Performance appraisal for the Board Committees is conducted annually. The performance appraisal on the individual director, the CEO/ President, or the Board, as the case may be, is collated by

Rating is conducted on the following areas: I. Setting of Committee Structure and Operation II. Oversight on Financial Reporting and Disclosures III. Oversight on Risk

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Board Secretariat. The results of the appraisal are then discussed by the Board Corporate Governance Committee. Any issues arising from the discussion of the Committee is submitted to the members of the Board of Directors which shall address the issues.

Management and Internal Controls IV. Oversight on Management and Internal Audit V. Oversight on External Audit

Individual Directors Annual appraisal to each member of the Board to determine each member’s strengths and weaknesses. The performance appraisal on the individual director, the CEO/ President, or the Board, as the case may be, is collated by Board Secretariat. The results of the appraisal are then discussed by the Board Corporate Governance Committee. Any issues arising from the discussion of the Committee is submitted to the members of the Board of Directors which shall address the issues.

Rating is conducted on the following areas: I. Company Policies II. Attendance and Participation III. Performance The assessment form likewise contains specific questions for executive directors, independent directors and Chairmen of Board Committees.

CEO/President Annual appraisal to each member of the Board to determine the CEO’s strengths and weaknesses. The performance appraisal on the individual director, the CEO/ President, or the Board, as the case may be, is collated by Board Secretariat. The results of the appraisal are then discussed by the Board Corporate Governance Committee. Any issues arising from the discussion of the Committee is submitted to the members of the Board of Directors which shall address the issues.

Rating is conducted on the following areas: I. Personal Qualities II. Leadership Skills III. Managerial Skills: Building Commitment IV. Managerial Skills: Ensuring Execution V. Board Relations VI. Financial Management VII. Overall Performance The assessment form likewise inquires about the CEO's major accomplishments and developmental needs.

G. N. INTERNAL BREACHES AND SANCTIONS

Discuss the internal policies on sanctions imposed for any violation or breach of the corporate governance manual involving directors, officers, management and employees

Violations Sanctions

Violation of any provision of the Company’s Manual of Corporate Governance

In the case of a first violation, the subject person shall be reprimanded. Suspension from office shall be imposed in the case of a second violation. The duration of the suspension

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shall depend on the gravity of the violation. For a third violation, the maximum penalty of removal from office shall be imposed.

Violation of the Company’s Code of Ethics and Business Conduct

The Code forms part of the terms and conditions of employment at the Company. Employees, officers and directors are expected to cooperate in internal investigations of allegations of violations of the Code, and actual violations may subject to concerned employee to the full range of disciplinary action by the Company. The Company may also report certain activities to its regulators, which could give rise to regulatory or criminal investigations. The penalties for regulatory and criminal violations may include significant fines, permanent bar from employment in the securities industry and, for criminal violations, imprisonment.

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Sources: 2014 Definitive Information Statement (SEC Form 20-IS) 2014 Director Nomination Form Articles of Incorporation and By-Laws Board Protocol Guidelines for the Nomination of Independent Directors Revised Manual of Corporate Governance Annual Report (SEC Form 17-A) Code of Ethics and Business Conduct Audit Committee Charter The above corporate reports and company policies are accessible from the Corporate Governance portion of the Company’s website at www.aboitizequityventures.com.

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Pursuant to the requirement of the Securities and Exchange Commission, this Annual Corporate Governance Report is signed on behalf of the registrant by the undersigned, thereunto duly authorized, in the City of _______________________ on_________________, 20___.

SIGNATURES

JON RAMON ABOITIZ ERRAMON I. ABOITIZ Chairman of the Board Chief Executive Officer

JOSE C. VITUG

STEPHEN T. CuUNJIENG Independent Director

RAPHAEL P.M. LOTILLA

Independent Director

M. JASMINE S. OPORTO Independent Director Chief Compliance Officer

SUBSCRIBED AND SWORN to before me this ________ day of __________________20__ , affiant(s) exhibiting to me their ___________________, as follows:

NAME/NO. DATE OF ISSUE PLACE OF ISSUE NOTARY PUBLIC Doc No._______________ Page No.______________ Book No.______________ Series of ______________